1. Describe the meaning of Contribution Margin ratio. 2.Explain the relationship between Contribution Margin ratio and Number of Breakeven units. 3. Explain why it is important to calculate Margin of Safety.
1. Describe the meaning of Contribution Margin ratio. 2.Explain the relationship between Contribution Margin ratio and Number of Breakeven units. 3. Explain why it is important to calculate Margin of Safety.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mr Zoo is planning to set up a mini Zoo in Howick.
The following relates to different pricing plans of visiting the zoo and costs of running the zoo.
Pricing Plan 1 - $30 per person (a special pack will be included)
Pricing Plan 2 - $25 per visitor (the special pack not to be included)
Variable Costs per visitor
Special Pack - $8
Zoo Consumables - $7
Zoo Expenses - $2
Total Fixed Costs - $200,000
1. Describe the meaning of Contribution Margin ratio.
2.Explain the relationship between Contribution Margin ratio and Number of Breakeven units.
3. Explain why it is important to calculate Margin of Safety.
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