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I need help!
Sales – Variable Cost = Contribution
So, what does lost contribution means?
It will depend on the context but it could ,for example, mean lost contribution which could have been made from selling a product has been lost because resources used in its manufacture have been used for an alternative use. Could often occur as one or more resources could be limited. Usually, an organisation will try to maximize best use for limited resources. Hope this helps.
Using the lecture video, Chapter 9 – Example 1. I do not understand why Rooks has a lost contribution of $15,000?
Kendra wrote:Using the lecture video, Chapter 9 – Example 1. I do not understand why Rooks has a lost contribution of $15,000?
Hi
Its not a formula.
Basically it is referring to opportunity cost, remember opportunity cost is the next best alternative forgone.
So here basically you are looking at 2 situations:
Either you continue to sell rooks which means you will earn the contribution of 15000 but also incur all the costs associated with rooks.
Or you will stop to sell rooks and you will stop to incur all the costs. But because you stop to sell the rooks, you have now lost also the contribution of 15000.I hope this helps you understand.
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