BMT 13 Contribution HL

Question 1

Contribution per unit (CPU)

Answer 1

the difference between price and unit (per 1 unit) variable cost

Question 2

Total contribution formula

Answer 2

total return (or profit) on selling a number of products
total contribution = total revenue - total variable cost
total contribution = CPU x quantity

thus profit = total contribution - Fixed costs
BEQ = fixed costs / CPU

Question 3

Contribution costing

Answer 3

an accounting method where only the variable (direct) costs are allocated to a product/department

Question 4

uses of contribution costing

Answer 4

• can identify the products that are the most profitable
• also those that are less profitable per unit
• then these total contributions are used to pay for the fixed costs