Management Accounting - Costing - Kaplan

sophie_612

Quick question on chapter 10 of the book test your understanding 2 I'm quite confused how they got the contribution answer, my understanding was you minus the overheads form the sales revenue then divide the fixed cost by this answer? When I look at the answer to this question there is no explanation of how they worked it out and I cant seem to figure it out.

Thanks in advance

Sophie

davealucas

I have never used Kaplan books but to my understanding the calculation of contribution is to take the revenue (sales) figure and deduct the variable costs (materials, labour and production overheads).

This leaves you with the contribution towards the fixed costs.