Hi , I was going through the video of health nuth in which you explain how to approach question in exam. In the First part of the question asked about marginal cost and break even of Gym and cafe.
In cafe part, it was given avg. customer spent 2.2 usd. and 60 % of which is for drinks, the profit margin for same is 60% and remaining is for food and 40 percent is margin for food.and then fixed cost of 3600.
now , You calculated contribution by - 2.2*.6*.6 = 0.792 for drinks and 2.2*.4*.4 = 0.352 for food and then totalled both to get total contribution per customer = 1.144 usd.
have you assumed we use marginal costing, because i was doing the question by pausing the lecture and did the same thing but i was going to find the fixed cost per customer( absorbed by units) and add to the profit. as the contribution is profit before margin.
there is no mention of Marginal costing in whole question.
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Health Nuts ( CVP analysis)
However, I remember in all example in lectures , absorbtion costing have nothing to do with any example.
4y ago#2Correct. When looking for breakeven (or using CVP analysis in general) it is always the contribution that we are interested in.
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