CONTRIBUTION

Question 1

What is contribution

Answer 1

Contribution is the money left after taking the variable costs away from the revenue - That money will then contribute to paying for, then once all the costs are taken care of, the remainder will be the profit (the amount of money that each unit contributes to covering variable costs)

Question 2

What is total contribution

Answer 2

The difference between total revenue and total variable costs
Formula = contribution per unit x output or total revenue - total variable costs

Question 3

EXAMPLE of total contribution

Answer 3

Total Contribution = £20 per unit
Total Sold = 3,000 Units
Total Contribution = £60,000 (contribution towards paying off costs and make a profit)

Question 4

How do you work out profit

Answer 4

Profit = Total contribution - fixed costs