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Dear Sir, How do you determine loss or profit if you are given only sales and contribution...
margin of a product mix of say 5 products? sales a, $50000 with a corresponding margin ratios of 50, 40, 20, 30, 25 % b, $60000 c, $100000 d, $30000 e, $40000
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85hafeezrm says
Contribution Margin is Price less Variable cost. Total contribution margin is composed of two components: Total fixed cost plus profit. In your question sales of 5 products were given with their respective Contribution margins. If we simply multiply each sale with its contribution margin, we get a total of $88,000 which is a mix of total fixed cost plus profit. In other words, one cannot determine loss of profit from the information given.
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