Contribution margin PDF

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Contribution margin calculation...

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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:

The Coca-Cola Company is an American company that was founded in the year 1892. They specialise in the manufacturing of beverages. With more than 2,800 products available in more than 200 countries, Coca-Cola is the largest beverage manufacturer and distributor in the world. It manufactures, markets, and distributes its products around the world, which are also widely accepted because of its non-alcoholic nature (Zeidan, n.d.).

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Identify which specific variables should be included in the calculation.

Some examples of variable costs that Coca Cola incurs include labour, raw materials, packaging, and transportation and deliver cost. Raw materials are a major variable cost for Coca Cola.

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Illustrate your explanation by calculating the contribution margin and contribution margin percent using hypothetical values.

Contribution margin is the ability of a company to cover its variable cost i.e., Revenue minius your variable expenses (Revenue – variable cost). Let’s say for instance cook sells about 1,000,000 units of its product at the rate of $5 per bottles in the year 2020. It’s incurred a variable cost of about 2$ per bottle and a fixed cost of about $2,500,000. Coca-Cola’s contribution margin would be $3/bottle ($5 - $2). For the entire unit it would be $3 x 1,000,000 units = $3,000,000.

Contribution margin ratio would be = (contribution margin / total sales) Total sales = $5 x 1,000,000 = $5,000,000 Contribution margin = $3,000,000

Contribution margin ration/percentage = $3,000,000/ $5,000,000 = 0.6 = 60% Operating income = Contribution margin – fixed cost = $3,000,000 - $2,500,000 = $500,000

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Explain what your calculated results tell you about the company’s sales and cost structure.

With respect to the calculation above, Coca-Cola seems to be doing pretty fine if the sales mix and unit remain above the present value. Her cost structure with respect to variable cost and fixed cost looks great. If the number of units sold decreases or variable cost increases, it means Coca-Cola would head back to break-even-point if not careful. So they have to continuously work on their distribution channel to increase her unit and maintain balance, as well as cut some cost while not compromising quality.

References Zeidan, A., n.d. The Coca-Cola Company American company. [Online] Available at: https://www.britannica.com/topic/The-Coca-Cola-Company [Accessed 13 Sep 2021]....