Cost Volume Profit Analysis - Contribution Margin in Accounting

The video tutorial explains the concept of contribution margin, which is the amount remaining from sales revenue after variable expenses are deducted. It highlights the importance of contribution margin in decision-making and provides equations for calculating it from both total and per unit perspectives. An example is given to illustrate the calculation of contribution margin and its impact on net operating income. The tutorial also introduces the contribution margin ratio, which indicates the increase in net operating income for every additional dollar sold.

What is the definition of contribution margin?

How does the contribution margin relate to net operating income?

What are the two ways to calculate contribution margin?

Explain how to calculate unit contribution margin.

What does a contribution margin of $30 per unit indicate?

How does fixed cost affect contribution margin?

What is the contribution margin ratio and how is it calculated?