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Module Two: Costs, Margins, Markups and Profits
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| Contribution Margin = |
Selling price – Unit variable cost |
| Cost = |
Selling price – $ Markup |
| Selling Price = |
Cost + $ Markup |
| $ Markup = |
% Markup on Cost * Cost |
| $ Markup = |
% Markup on Selling Price * Selling Price |
| % Margin on Cost = |
($Markup / Cost) * 100 |
| % Margin on Selling Price = |
($Markup / Selling Price) * 100 |
| % Margin on Cost = |
(% Margin on Selling Price / (100% – % Margin on Selling Price)) * 100 |
| % Margin on Selling Price = |
(% Margin on Cost / (100 + % Margin on Cost)) * 100 |
| Breakeven Volume = |
Fixed Costs / Contribution Margin |
| Breakeven ROS = |
Divide fixed costs by % markup on selling price minus return on sales objective |
| Return on Sales = |
(Total Revenue – Total Costs) / Total Revenue |
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Pricing
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| Elasticity = |
% ∆ in Quantity Demanded / % ∆ in Price, where
% ∆ in Quantity Demanded = (Q2 – Q1) / Q1
% ∆ in Price = (P2 – P1) / P1 |
| Optimal Price = |
(Maximum Reservation Price + Unit Variable Costs) / 2 |
| Elasticity at Optimal Price = |
1 / (% Mark-Up on Selling Price) |
| Total Contribution Margin = |
(price – variable cost) * quantity. |
