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Contribution to margin is the amount of revenue available per unit to cover indirect costs. Example: Sales Price: $2.00 per pack of Oreos Direct Costs: $0.40 per pack Indirect Costs: $16,000 What is the contribution to margin?
Contribution to margin is the amount of revenue available per unit to cover indirect costs. Example: Sales Price: $2.00 per pack of Oreos Direct Costs: $0.40 per pack Indirect Costs: $16,000 What is the contribution to margin?
$2.00 - 0.40 = $1.60
How many Oreo packs need to be sold to break even?
How many Oreo packs need to be sold to break even?
$16,000 / $1.60 = 10,000$ packs
If Oreo required a profit of $140,000, how many three packs of Supreme Oreos need to be sold?
If Oreo required a profit of $140,000, how many three packs of Supreme Oreos need to be sold?
Contribution to margin = $8.00 - $1.00 = $7.00, Indirect + Profit = $70,000 + 140,000 = $210,000, $210,000 / $7 = 30,000$ units
