The contribution margin ratio, also known as the contribution-to-sales ratio, production-volume ratio, or profit-volume ratio, is a financial metric that shows the relationship between a product’s contribution margin and its sales value. This ratio is essential for ranking products based on their relative profitability.
In process costing, the costs incurred prior to the separation point after which the joint products are treated individually. Joint costs are therefore common to the joint products and need to be apportioned to determine individual product costs.
The difference between the level of activity at which an organization breaks even and a given level of activity greater than the breakeven point, especially the forecast level in a breakeven analysis. The margin of safety may be expressed in the same terms as the breakeven point, i.e., sales value, number of units, or percentage of capacity.
