Chapter 19. Analyzing Contributions and Margins
Management accounting concerns itself with the internal operations and drivers of business performance. Among its primary tools are contribution analysis and break-even analysis, which use financial indicators such as these:
Contribution margin. This is usually defined as the sales revenue less the variable costs of production.
Unit contribution. This is the margin contributed by each unit sold.
Break-even point. This is the point in the sales process at which the revenues equal the costs of production.
These indicators enable you to make decisions about how you can:
Increase product profitability
Manage your product sales mix
Optimize your resources to hold your costs down and raise your profits
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