Contribution margin per unit = selling price per unit – variable costs per unit

Total contribution = Volume X Selling price per unit – variable costs per unit
Target Contribution Margin = Fixed costs + Profit Target
Income statement
Rs
Sales (700 units X Rs 8) 5600
Variable cost (700 units X Rs 6) 4200
Contribution margin 1400
Fixed cost 1000
Profit 400
Variable cost over sales
4200/5600 * 100
= 75%
Contribution margin over sales
CM = 5600 – 4200 = 1400
CM/S = 1400/5600*100 = 25%
Per unit Calculation
Sales price 8
Less: Variable cost 6
Contribution margin 2
6/8*100 = 75%
2/8*100 = 25%
 Total per unit %
Sales (700 units X Rs 8) 5600 8 100%
Variable cost (700 units X Rs 6) 4200 6 75%
Contribution margin 1400 2 25%
Fixed cost 1000
Profit 400

Break even sales in Rs

To calculate required amount in absence of certain information
Required amount = given amount X % of required amount
% of given amount

CM = 1000
Break even sales in Rs = Target CM/ C/S ratio
Break even sales in units = Fixed cost/ Contribution margin per unit
A company sold a fans at Rs 2,000 each. Variable cost Rs. 1200 each and fixed
cost Rs. 610,000.
Calculate:
Calculate break even sales in Rupees.
Break even sales in units.
Sales in units to earn a profit of Rs. 20,000.

Sales Per unit 2000

Variable cost 1200
CM 800
Fixed cost 610000
Profit
Contribution to sales ratio = 800/2000 = 0.4
Break even sales in Rs = 610000/0.4 = 15253000
Break even sales in units = 610000/800 = 762.5 units
Target contribution = fixed cost + target profit = 610000+20000 = 630000
Target contribution margin/CM per unit
630000/800 = 787.5 units