which of the following is correct? total revenue — variable costs = contribution margin course hero

What will remain constant with a decrease in total dollars of sales?

D. Profits will remain constant with a decrease in total dollars of sales if the sales mix also remains constant.

Why do profits decline with an increase in total dollars of sales?

A. Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the high contribution margin product.

What is fixed cost?

A. fixed costs that are not traceable to the segments and would remain even if one of the segments were eliminated.

What is C. in sales?

C. expresses variable cost in terms of sales dollars.

Where does the total revenue line cross the horizontal axis?

A. the total revenue line crosses the horizontal axis at the break-even point.

Is the slope of the total cost line dependent on the variable cost per unit?

A. The slope of the total cost line is dependent on the variable cost per unit.

What is the selling price less unit contribution margin?

D) Selling price less unit contribution margin equals unit fixed cost for all values below or at the break-even number of units.

Can service companies compute gross margin?

D) Service companies can compute a gross margin but not a contribution margin.

What is net profit margin?

Net Profit Margin Net Profit Margin (also known as "Profit Margin" or "Net Profit Margin Ratio") is a financial ratio used to calculate the percentage of profit a company produces from its total revenue. It measures the amount of net profit a company obtains per dollar of revenue gained.

What is financial modeling?

What is Financial Modeling Financial modeling is performed in Excel to forecast a company's financial performance. Overview of what is financial modeling, how & why to build a model.

What is leverage ratio?

Leverage Ratios A leverage ratio indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. Excel template

Is $10 million fixed cost included in the formula?

The fixed costs of $10 million are not included in the formula, however, it is important to make sure the CM dollars are greater than the fixed costs, otherwise, the company is not profitable.

How Important is Contribution Margin in Business?

When a company is deciding on the price of selling a product, contribution margin is frequently used as a reference for analysis. Fixed costs are usually large – therefore, the contribution margin must be high to cover the costs of operating a business.

How to determine the target number of units that need to be sold in order for a business to break even?

The target number of units that need to be sold in order for the business to break even is determined by dividing the fixed costs by the contribution margin per unit.

Why do variable costs rise?

Variable costs rise as production increases and falls as the volume of output decreases. Also, it is important to note that a high proportion of variable costs relative to fixed costs, typically means that a business can operate with a relatively low contribution margin. In contrast, high fixed costs relative to variable costs tend ...

What are some examples of variable costs?

Examples of variable costs are: Direct materials – Raw materials that are primarily needed in producing goods.

What is depreciation in business?

Depreciation – Amortization of acquisition costs for property, plant, and equipment, which is spread throughout its useful life

What is contribution margin?

Contribution margin is a business’ sales revenue. Sales Revenue Sales revenue is the income received by a company from its sales of goods or the provision of services. In accounting, the terms "sales" and. less its variable costs.

What is sensitivity analysis?

What is Sensitivity Analysis? Sensitivity Analysis is a tool used in financial modeling to analyze how the different values for a set of independent variables affect a dependent variable