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C/S ration Shows how much each $ sold actually contributes to fixed costs.
so, If c/s ration of product A = 0.4 and B= 0.25 and combined is 0.34375.
how would you interpret them,
because Clearly , the C/S ratio if multiplied by 100 , it shows percent of contribution as sales not percent of fixed cost as sales. to find the fixed cost per $ , It should be subtracted from 1. like Fixed cost for each unit sold of A = 0.6 per usd.
am i right ?
also, please do tell how do you find out the mosts profitable product from c/s ratio.
I understood, I read an ACCA article on same and The wording confused me. When I returned to notes , it’s was there : company can reach breakeven first if It sells highest C/S ratio (most profitable) product first.
That is correct 🙂