In this unit, you have been introduced to contribution margin, break-even analysis, and cost-volume-profit analysis. The contribution margin is how much a product contributes to covering fixed costs. Break-even is the point at which both variable and fixed costs are recouped through pricing, with no amounts left over. Both contribution margin and break-even analyses are part of cost-volume-profit analyses (CVP); however, in addition, CVP can be further expanded to determine how changes in prices, costs, and volume impact profits. CVP can also be used to determine the volume needed to make a targeted profit, which can be expressed in both units and sales dollars. Analyses of these variables are critical to management decision-making process. Use this background knowledge to respond to the discussion prompt below:

Refer to the manufacturing company you selected for the Unit 2 Discussion and explain how you would determine the company’s contribution margin and contribution margin percent. In your initial post include the following:

• Identify which specific variables should be included in the calculation.
• Illustrate your explanation by calculating the contribution margin and contribution margin percent using hypothetical values.
• Explain what your calculated results tell you about the company’s sales and cost structure.