13 Contribution

Question 1

Define contribution

Answer 1

the amount of money left over from a sale after variable costs have been subtracted from revenue. The money contributes to fixed costs and profit.

Question 2

Define contribution costing

Answer 2

the use of contribution to help make decisions based on costs, such as which order to accept.

Question 3

Formula for unit contribution

Answer 3

contribution per unit = selling price - variable cost

Question 4

Formula for total contribution

Answer 4

total revenue - total variable costs

Question 5

Formula for break even

Answer 5

fixed costs/contribution

Question 6

Formula for reaching a specific profit target/output

Answer 6

fixed costs + profit target/contribution

Question 7

Define contribution pricing

Answer 7

a pricing strategy that involves setting up a price that exceeds the value of the variable cost.

Question 8

Define overheads

Answer 8

he costs of running a business that are not directly related to producing a good or service.