Contribution Margin?

Question

What is the contribution margin in the following example?

a. Revenues: $1,200,000

b. Variable costs $ 215,000

c. Fixed costs: $ 1,000,000
What is the contribution margin percentage?

Answer 1

Hi,

The contribution margin is total revenue minus total variable cost. This difference can be expressed as a percentage of total revenue.

Here's an example of a contribution format income statement:
Beta Sales Company Contribution Format Income Statement For Year Ended December 31, 200X

Sales $ 462,452

Less Variable Costs:
Cost of Goods Sold $ 230,934
Sales Commissions $ 58,852
Delivery Charges $ 13,984

Total Variable Costs $ 303,770
Contribution Margin (34%) $ 158,682

Less: Fixed Costs:

Advertising $ 1,850
Depreciation $ 13,250
Insurance $ 5,400
Payroll Taxes $ 8,200
Rent $ 9,600
Utilities $ 17,801
Wages $ 40,000

Total Fixed Costs $ 96,101
Net Operating Income $ 62,581

Following this pattern with your numbers gives:

Sales $ 1,200,000

Less Total Variable Costs: $ 215,000
Contribution Margin (82%) $ 985,000

Less: Fixed Costs:
Total Fixed Costs $ 1,000,000
Net Operating Income $ -15,000


The contribution margin is $985,000.
The contribution margin percentage is 82%.

But, the net operating income indicates there is a problem here that needs to be fixed.


I hope that helps!!

Answer 2

Hello
The contribution margin is 1200000 - 215000 = 985000

I think the contribution ration is 985000/1000000 = 98.5%

Hope This Helps!

Answer 3

get off the internet and figure your own homework out