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

Exercise 29

Scott Power produces batteries. Scott has determined its contribution margin to be $2 per battery and its contribution margin ratio to be 0.5. What is the effect on profits of the sale of one additional battery? Of one additional dollar of sales?

Step 1 of 4

Contribution Margin

The contribution margin is defined as the contribution of the company expressed in numbers and is selling price per unit less the variable costs per unit.