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Difference between contribution margin and gross margin

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Question - CPV Analysis in a Single Product Environment - The Children's Company manufactures and sells footballs for kids. Currently, 400,000 units are produced and sold per year at a price of £1150 per unit. Annual fixed costs are £900,000. Unit variable costs are £12.00.

Required -

a) Calculate and compare the contribution margin per unit with the total contribution margin.

b) What is the difference between contribution margin and gross margin? Which one is more important for decision making in the short-term and the long-term, respectively?

c) What is the current operating income?

d) The central premise of CVP analysis is that the fixed and variable elements of costs can be accurately identified. Do you agree with this statement? Explain.

e) What is the present breakeven point in units and revenues?

Reference no: EM133182618

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