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February 1, 2020 at 12:59 pm
In his own formulated example..How is the contribution $2000 when it wasn’t given? He only stated that fixed cost is $2000
Kim Smith says
February 2, 2020 at 9:01 am
To give it its full title “contribution” is “contribution to fixed costs and profit”. In other words, the excess of revenue over variable costs first goes towards covering the fixed costs – at the point at which this excess = fixed costs is the point of breakeven – and, thereafter, any further excess will be profit.
The foundation of breakeven analysis is that: Sales revenue – variable costs (i.e. Contribution) = Fixed costs at the point of breakeven
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