scott power produces batteries. the company has determined its contribution margin to be $3.50 per battery and its contribution margin ratio to be 0.59. what is the effect on profits of the sale of one additional battery? of one additional dollar of sales? (round your answers to 2 decimal places.)

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27-10-2022
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scott power produces batteries. the company has determined its contribution margin to be $3.50 per battery and its contribution margin ratio to be 0.59. what is the effect on profits of the sale of one additional battery? of one additional dollar of sales? (round your answers to 2 decimal places.)

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The operating profits will increase by $3.50 on the sale of one additional battery. Also, every additional dollar of sales will contribute $0.59 to operating profits

In cost and management accounting, the idea of the contribution margin is frequently employed. When calculating the contribution margin, the total variable costs are subtracted from the sales revenue.

The difference between sales revenue and variable cost per unit is represented by the $3.50 contribution margin. The overall contribution margin will rise by $3.50 for every additional unit of the product sold. Because fixed costs do not rise as a result of more sales units, the operational profits will also rise by $3.50. The contribution margin is shown as a percentage of sales revenue using the contribution margin ratio of 0.59 (or 59%). Accordingly, $0.59 more in operational profits will be made for every $1 more in sales.

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