Calculating the Contribution Margin

Calculating the voice Margin Constance Hall Lindemann HCA 311 Health guardianship Financing & Information Systems July 1, 2012 Instructor: Heather Ables Contribution margin is nothing more than a way to rede if an organizations operation is profitable. The be for any business ordain come back into two broad categories: fixed cost and variable quantity costs. unyielding costs are those whose amounts hardly perpetually change which path they are fixed, steady and unchangeable. Variable by contrast, are costs that are the exact opposite, they often fluctuate. An poser could be the engage on an building which is a fixed cost, whereas the electric line for the building will change upon the amounts of electricity used per calendar month this is an example of variable cost. A region margin will focus on variable costs, as they are the costs that change from month, quarter, and annually. Because they are the ones that change this makes them harder to predict. Using a donation margin you can easily plan for what the expenditures may be for the following month, quarter, etc. Many companies will use contribution margins as a profit measure to manage these ever changing costs.

Since the financial manager is responsible for keeping cost under control, contribution margins is the best way to gauge how swell management is doing. The first step in such dislocation is the calculation of the contribution margin. The significance of dividing costs into fixed and variable becomes obvious now, for a contribution margin calculation stresses each fixed or variable cost classifications; no contrasting costs are recognized in this calculation. Using the example from the text; the program director determines that his program has revenue for the stratum of $1,210,000. He believes his variable expense amounts to $205,000 and he knows his fixed expense amounts to $1,100,000. (Baker, 2011, p. 365) Mental Health Programs @ Community Center| Revenue for year... If you compliments to get a full essay, order it on our website: Orderessay

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