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Contribution Margin Analysis
Contribution margin analysis emphasized on explaining the differences between planned and actual contribution margins. Managers regularly use the contribution margin in planning and supervisory the operations.
Quantity Factor
The outcome of a difference in the number of units sold, assuming there is no change in sale price per unit. The difference comes in positive, and it increases the contribution margin, the difference comes in negative, and it decreases the contribution margin.
To Explain: The reason how the quantity factor increase or decrease in the amount of sales computed using the contribution margin analysis.
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Chapter 20 Solutions
CengageNOWv2, 2 terms Printed Access Card for Warren/Reeve/Duchac’s Financial & Managerial Accounting, 14th
- Explain how a contribution margin income statement can be used to determine profitability.arrow_forwardWhich of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? a. costs and expenses ratio b. contribution margin ratio c. margin of safety ratio d. profit ratioarrow_forwardHow change in activity(sale) affect the contribution margin and net operating income?arrow_forward
- Which of the following would be considered as a limiting factor to maximize the profit? O a. Book value O b. Fixed cost Oc. Contribution d. Salesarrow_forwardDefine return on sales ( or profit margin).arrow_forwardWhich of the following formulas is used to calculate the contribution margin ratio?(Sales − Fixed costs) ÷ Sales.(Sales − Total costs) ÷ Sales.(Sales − Cost of goods sold) ÷ Sales.(Sales − Variable costs) ÷ Sales.arrow_forward
- Prepare an analysis of the sales quantity and unit price factors did the price decrease generate sufficient volume to result in a net increase in contribution marginarrow_forwardIdentify two ways in which a contribution margin income statement differs in format from a traditional income statement. Which is more useful for decision making and why?arrow_forwardWhat's the difference between the profit margin and gross margin ratio?arrow_forward
- Target profit is added to what other financial statement line item, or element, to determine the numerator in the overall target contribution margin (CM) calculation in break-even analysis? Variable costs Fixed costs Net income after taxes Operating profitarrow_forwardThe difference between total sales in dollars and total variable expenses is called: a. net profit b. net operating income c. the gross margin O d. the contribution marginarrow_forwardWhich one of the following is defined, at any given sales volume, as the ratio of the total contribution margin to operating profit at that sales volume?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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