Exam (elaborations)
BUS 5110 Unit 3 Discussion Assignment (100% correct)
- Module
- Institution
A guide to assignment on contribution margin calculated for Unilever plc with detailed procedure and logical conclusion.
[Show more]
Seller
Follow
MasterAddis
Reviews received
Content preview
Contribution margin is a business’ sales revenue less its variable costs (Corporate FinanceInstitute, 2021). The resulting value is used to cover fixed costs and the excess is considered
earnings or income. Variable costs are costs that vary with the number of units produced. The
variable costs are comprised of manufacturing costs (product costs) and some nonmanufacturing
costs (period costs) like selling and administrative costs.
Contribution margin can be calculated for total data, per unit data, or ratios. The variables
involved and the calculation steps are presented below. Unilever nigeria, Plc. sells Lifebuoy
Total Soap 90g (Pack of 12) for $30 and assuming production cost is $8 per pack and the selling
and administrative cost is $4 per pack. Thus, the variable costs are $12 per pack. Unilever's
contribution margin is $18 ($30-$12) per pack. Below I have presented contribution margin
information, assuming 100,000 units are produced and sold per month and come with a fixed
cost of 200,000.
Per Unit Total Ratio
Sales 30 3,000,000 100%
Variable Cost 12 1,200,000 40%
Contribution Margin 18 1,800,000 60%
Fixed Cost 200,000
Net Income 1,600,000
Based on the above analysis, we can see that Unilever can make a net income of $1.6 million if
they sold 100,000 units. We can also do breakeven analysis and find that they need to sell around
11,111 units. This means if they sold 11,111 units the total cost will be equal to total sales.
Another important point is contribution margin percent which is the contribution margin
expressed as a percentage of sales. It is calculated by dividing the sales by the contribution
margin and expressing the result in percentage. The higher the contribution margin the more
scalable the business becomes. This means as the company produces more units the profitability
of the company increases.
Unilever follows a cost-driven structure which means it strives to keep prices as low as possible.
Various innovative ways are used to bring the price down from raw material sourcing to
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller MasterAddis. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.39. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
83750 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now