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Contribution margin (CM), or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. This concept is one of the key building blocks of break-even analysis. [1]
All units produced are sold (there is no ending finished goods inventory). When a company sells more than one type of product, the product mix (the ratio of each product to total sales) will remain constant. The components of CVP analysis are: Level or volume of activity. Unit selling prices; Variable cost per unit; Total fixed costs
The Break-Even Point can alternatively be computed as the point where Contribution equals Fixed Costs. The quantity, (), is of interest in its own right, and is called the Unit Contribution Margin (C): it is the marginal profit per unit, or alternatively the portion of each sale that contributes to Fixed Costs. Thus the break-even point can be ...
Contribution margin-based pricing is a pricing strategy which works without any mention of gross margin percentages or sales (Gross Merchandise Volume). (German:Deckungsbeitrag) It maximizes the profit derived from a company's assortment, based on the difference between a product's price and variable costs (the product's contribution margin per unit), and on one's assumptions regarding the ...
The factors of production provide "services" which raise the unit price of a product (X) relative to the cost per unit of intermediate goods used up in the production of X. In national accounts , such as the United Nations System of National Accounts (UNSNA) or the United States National Income and Product Accounts (NIPA), gross value added is ...
Gross margin can be expressed as a percentage or in total financial terms. If the latter, it can be reported on a per-unit basis or on a per-period basis for a business. "Margin (on sales) is the difference between selling price and cost. This difference is typically expressed either as a percentage of selling price or on a per-unit basis.
The growth accounting model is normally expressed in the form of the exponential growth function. As an abstract example consider an economy whose total output (GDP) grows at 3% per year. Over the same period its capital stock grows at 6% per year and its labor force by 1%.
Management accounting is an organization's internal set of techniques and methods used to maximize shareholder wealth. Throughput Accounting is thus part of the management accountants' toolkit, ensuring efficiency where it matters as well as the overall effectiveness of the organization. It is an internal reporting tool.