Why do you calculate the cumulative profit using the contribution less fixed cost? i was thinking the cumulative profit should be total revenue less variable cost and fixed cost.could you please explain. Thank you
Although you cannot be asked to produce the graph, it is possible that you could be presented with the graph and be expected to be able to interpret it.
When we calculate the average CS ratio, we should also consider how much each product “weighs”. Imagine you sell only one unit of C and 4000 of V, by your means, the average cs ratio would be 18.75%, it’s way off from v’s cs ratio 12.5% which doesn’t make sense. One unit sale from C shouldn’t have such a big effect on cs ratio. That’s why we should use the method from the vid to be more accurate.
Thank you Open Tuition 🤓
You are welcome :-)
thanks so much
can you please explain the weighted average contribution to sales ratios please!
Why do you calculate the cumulative profit using the contribution less fixed cost? i was thinking the cumulative profit should be total revenue less variable cost and fixed cost.could you please explain. Thank you
The contribution is the revenue less the variable cost, so the profit is the contribution less the fixed cost.
is grap for representation purpose or do we have it for exam?
Although you cannot be asked to produce the graph, it is possible that you could be presented with the graph and be expected to be able to interpret it.
Why can t we take the simple average of cvp s ?
When we calculate the average CS ratio, we should also consider how much each product “weighs”. Imagine you sell only one unit of C and 4000 of V, by your means, the average cs ratio would be 18.75%, it’s way off from v’s cs ratio 12.5% which doesn’t make sense. One unit sale from C shouldn’t have such a big effect on cs ratio. That’s why we should use the method from the vid to be more accurate.