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Calculations |
Profit Equation and Contribution Margin |
- Profit = Sales -Total costs
- Profit = Sales -Total variable costs - Total Fixed costs
- Contribution margin = Total revenue – Total variable costs
|
| Sales |
XX |
| -Variable Cost |
(XX) |
| Contribution |
XX |
| -Fixed Cost |
(XX) |
| Profit |
XX |
|
- Profit = (S-V)*Q – FC
- Q = (FC + Expected Profit)
(S - VC)
- Q is the no. of units required to be sold to obtain target profit.
- S = Selling Price p.u.
VC = Variable cost p.u.
FC = Fixed Cost.
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