difference between gross margin and contribution margin? Gross Margin is the Gross Profit as a percentage of Net Sales. The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses. Contribution Margin is Net Sales minus the variable product costs and the variable period expenses. The Contribution Margin Ratio is the Contribution Margin as a percentage of
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Average variable cost per passenger $(70) Contribution Margin per passenger $90 Contribution Margin = Per Passenger fare - Variable cost per passenger Contribution Margin ratio 56.25% Contribution Margin Ratio = Contribution Margin Per Passenger / Average full passenger fare x 100 Fixed operating cost per month $3,150,000 Breakeven point in passengers 35,000 Breakeven point in passengers = Fixed operating cost per month / Contribution Margin per passenger Breakeven point in revenue
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Fundamentals of Cost Accounting Week 5 Assignments Chapters 8 and 9 Questions Chapter 8 6. Discuss the sequence in which the major components of the master budget are prepared. Why is it necessary to prepare the components in such a sequence? The Sequence for a master budget is as follows: A production budget, purchases budget, personnel budget, direct labor budget, overhead budget, selling and administrative budget, capital budget, and budgeted financial statements. Using this sequence to
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expenses | | $ 12,000.00 | 60% | $ 12.00 | | | | | | Contribution Margin | | $ 8,000.00 | 40% | $ 8.00 | | | | | | Fixed Expenses | | $ 6,000.00 | | | | | | | | Net operating income | | $ 2,000.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. | Total contribution margin | | $ 8,000.00 | | | | | | | | Total units sold |
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CHAPTER 19 RELEVANT COSTS FOR DECISION MAKING I. Questions 1. Quantitative factors are those which may more easily be reduced in terms of pesos such as projected costs of materials, labor and overhead. Qualitative factors are those whose measurement in pesos is difficult and imprecise; yet a qualitative factor may be easily given more weight than the measurable cost savings. It can be seen that the accountant’s role in making decisions deals with the quantitative factors. 2
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Passengers Per Train | 90 | (2) Load Factors | 70% | (3) Full Fare Seats Filled (1) * (2) | 63 | | | (4) Fare | $ 160 | (5) Less Variable Costs Per Customer | $ (70) | (6) Contribution Margin Per Customer (4) - (5) | $ 90 | | | (7) Revenue Per Car [ (4) * (3) ] | $ 10,080 | (8) Contribution Margin Per Car [ (6) * (3) ] | $ 5,670 | | | (9) Fixed Costs | 3,150,000 | | | a. | | (10) Breakeven (passengers) [ (9) / (6) ] | 35,000 | (11) Breakeven revenue [ (10) * (4)
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BILL FRENCH I. BACKGROUND AND ISSUES Bill French was staff accountant of Duo-Products Corporation. He was reporting to Wes Davidson and had been doing routine types of analytical work. In an informal manager’s meeting, Davidson invited Bill French to attend. French choose to present break-even data to determine the level at which the company must operate in order to break-even. During the meeting, French was challenged and questioned because his presentation failed to consider some aspects of
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1.) Total Contribution Margin/Total Revenue= Total Weighted Average Contribution Margin 3,500,000/4,763,000=0.735=73.5% 2.) The size of the weighted average contribution margin indicates that the coverage of fixed expenses and the change in the profits are very sensitive to a change in revenue dollars. Since Bridgestone has a high weighted average contribution margin, every revenue dollar will have a large impact on the ability to cover fixed expenses and to create a profit. 3.) Breakeven
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been reclassified as variable selling costs on page 33? A. The income statement shown on page 33 exclusively shows the contribution margin. This format is used for internal company analysis. Benetton has chosen to show it as a part of annual report. The variable costs (Distribution and Transport costs, Sales commission) are clubbed together. This format is called the contribution format. The income statement on page 50 shows the variable costs and fixed costs more clearly. It has broken down the
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volume)*budgeted selling price; net sales volume variance=(actual volume-budgeted volume)*budgeted contribution margin; 20-profit=total revenues-total cost; markup on cost base=(cost not included in the base+desired profit)/costs included in the base; 19-inventory turnover=annual demand in units/average inventory in units (or) COGS/ average inventory in dollars; gross margin return on investment(GMROI)=gross margin/average inventory; cycle time=setup time+Processing
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