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Dear Tutor,
I am having problem understanding why we calculate C/S ratio. Can you help me please
The C/S ratio is useful in its own right as it tells us what percentage each $ of sales revenue contributes towards fixed costs.
It is also invaluable in helping us to quickly calculate the break-even point in $ sales revenue, or the sales revenue required to generate a target profit.
FC / CS Ratio = B E Sales Revenue
Which is the same as FC / Cont per unit = BE units which multiplied by the selling price also gives you B E Sales Revenue
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