Chapter 21, Problem 8QS

To determine

Introduction:

Contribution Margin Ratio is calculated by dividing Contribution Margin by Total Sales. It is the difference between Selling Price and Total Variable Costs expressed as a percentage. It depicts the percentage of Revenue available to cover Fixed Cost and generate profits.

Break- even point is calculated by dividing Total Fixed Costs incurred by Contribution Margin per unit of the product. It is a point where Total Revenue equals the Total Costs of the concern. In simple terms, it is the point where there is no profit or loss. After this point, Revenue begins to exceed the Costs incurred.

Contribution Margin Ratio and (2) Break- even point in dollars of SBD Phone Company