Page 59 - P1 Integrated Workbook STUDENT 2018
P. 59
Break-even analysis
Single-product context
1.1 The concept of contribution
Variable costs should include
ALL variable costs – both
production and sales.
Contribution = Selling price – variable costs
Alternatively, total sales revenue
less total variable costs will provide
the total contribution.
Contribution is used in requirements that ask for the break-even point in units.
Contribution per unit Alternatively, use
Contribution ratio = ––––––––––––––––– sales revenue and
Selling price total contribution.
The contribution ratio is used in requirements that ask for the break-even point in $.
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