Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 5

What is the contribution margin ratio and how is it used?

Step 1 of 2

Contribution Margin:

The contribution margin ratio of the total contribution margin of a single unit to the selling price of that unit. It’s the ratio of contribution margin to sales. It’s the alteration in the operating profit linked with the modification in the sales price per unit. This ratio is useful for a decent estimate of the selling price per unit to achieve the breakeven.