A menu item with a price of $12.75 and a cost of food of $7.50 has a contribution margin of _____?

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09-09-2022
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A menu item with a price of $12.75 and a cost of food of $7.50 has a contribution margin of _____?

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khuranashilpa76 khuranashilpa76 · Answer 1 · 2022-09-13T20:58:58+02:00

A menu item with a price of $12.75 and a cost of food of $7.50 has a contribution margin of $5.25

Contribution margin indicates you the aggregate amount of sales available after variable charges to cowl constant prices and offers profit to the company,” Knight says. you may think of this as the portion of sales that allows offsetting constant charges.

calculation,

menu item with a price of $12.75

cost of food of $7.50

Contribution margin = $12.75 - $ 7.50

=$5.25

Contribution margin is useful for figuring out how income, variable prices, and glued expenses all have an impact on operating profit. It offers enterprise owners a manner of assessing how numerous income levels will have an effect on profitability. it is able to be calculated on the unit or overall level and can be expressed in dollars or as a percentage.

The contribution margin ratio is the distinction between an organization's sales and variable expenses, expressed as a percentage. the overall margin generated through an entity represents the full income to be had to pay for fixed costs and generate earnings.

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