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Consider the following scenario - Research Paper Example
This figure was calculated by subtracting variable costs from the sales price. A high contribution margin is a positive indicator of profitability. The contribution margin is used to cover the fixed expenses of the company.
The net income of the company during the year was $112,000. A firm’s net income reflects how much profit the company generated during a period of twelve months. The gross profit of the organization was $232,000. Gross profit is a broad measure of profitability.
The new breakeven point is 10,893 units. The changes in the compensation system increased the variable costs of the company. The end result was that the company had a higher breakeven point than with the old compensation system. A higher breakeven point is an undesirable ...