Contribution Margin Approach Flashcards
1
Q
Contribution Margin =
A
Revenues - VC
2
Q
Define Contribution Margin
A
Amount of revenue available to cover fixed costs and NI
3
Q
The larger the CM,
A
the more left over to cover fixed costs and profit
4
Q
CM% =
A
1- (VC/Sales)
X cents per dollar were available to cover fixed cost and profits
5
Q
BEP +
A
Fixed costs / CM%
Every dollar over the BEP will generate X cents of profit per dollar
Every dollar under the BEP will generate X cents of loss per dollar
6
Q
Average Rx Price =
A
Sales/total # Rx
7
Q
Average Variable Cost per Rx =
A
Total VC/total #Rx
8
Q
Per Rx Contribution =
A
Avg Rx Price - Avg variable cost per Rx
9
Q
BEP
A
FC/Per Rx contribution
Point at which we will break even with what is spent
10
Q
5 Assumptions of BEA
A
- Data on cost and revenues are available
- All cost are fixed or variable
- Costs and revenues act in a linear manner
- DEA is applied to a restricted, relevant range of sales volume (short range only)
- Product mix doesn’t change over period covered by BEA
11
Q
Multiple: Stay Even Point =
A
(FC + NI)/ CM%
12
Q
Single: SEP =
A
(FC + NI)/Per Rx CM
