Question

Refer to the manufacturing company (Cement Manufacturing compnay) you selected for the 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

Answer 1

Cement manufacturing company details ( hypothetical values as required in the question)

Assumption

Sales	$10,000
Less : Variable Cost
Direct Material	$2,000
Direct labor	$1,500
Contribution Margin	$6,500

The specific variables that will be included are direct material and direct labor used in manufacturing the cement in the industry.

Contribution Margin % = Contribution / Sales * 100 = $6,500 / $10,000 = 65%

Sales comprises of variable cost and contribution, if contribution is 65% of sales than variable cost is 35%

Contribution margin and variable cost are complementary to each other.