Profitability Analysis CONTRIBUTION MARGIN (COST VOLUME PROFIT) CHAPTER 6. marketing costs money BA 315- MARKETING MANAGEMENT (L.P. CHEW).
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Profitability AnalysisCONTRIBUTION MARGIN (COST VOLUME PROFIT)CHAPTER 6
marketing costs money
BA 315- MARKETING MANAGEMENT (L.P. CHEW)
Profitability analysis is the assessment of the impact of various marketing strategies and programs on the profit contribution that can be expected from a product or product line.
The percentage variablecontribution margin indicates thepercentage of each additional sales dollar that will heavailable to help the firm cover its fixed costs andincrease profits.
Fixed and variablecost identification allows managers to examine some of the profitability implications of pricing and marketing expenditure decisions on costvolumeprofit relationships and its implications for marketing budgets.
Economies of scaleexist when a large portion of totaloperating costs are fixed and large changes in volumeresult in significant changes in average cost perproduct.
Many firms employ minimal fixed cost strategies, potential negative consequence economies ofscale.As a firm becomes more experienced in producing aproduct, variable costs decrease as volume increases. Phenomenon is"experience curveeffect."
managers must have an understanding of product objectives and industry sales forecasts to develop a budget. The budgeting process can proceed in either of two ways: