Could someone help me out with finding the CM ratio per unit, pretty pleeeeeeeeease?

I know that CM ratio = (sales - var. costs) / sales
What happens if you have say, two products.

Sales of product A = $100,000
Sales of product B = $120,000
Var. costs of A = $20,000
Var. costs of B = $30,000
Selling price of A = $100 per unit
Selling price of B = $100 per unit

Do I add the total sales of A and B together?
Do the per unit ratios have to add up to equal 100%?

Answer me this question and I promise to contribute by answering 10 other questions somewhere else. How 'bout it? :D

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Originally Posted by circletoe

Could someone help me out with finding the CM ratio per unit, pretty pleeeeeeeeease?

I know that CM ratio = (sales - var. costs) / sales
What happens if you have say, two products.

Sales of product A = $100,000
Sales of product B = $120,000
Var. costs of A = $20,000
Var. costs of B = $30,000
Selling price of A = $100 per unit
Selling price of B = $100 per unit

Do I add the total sales of A and B together?
Do the per unit ratios have to add up to equal 100%?

Answer me this question and I promise to contribute by answering 10 other questions somewhere else. How 'bout it? :D

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circletoe -

I'd like to take a stab at this... one thing that I'm wondering though is do you know your variable cost per unit—you did give me the total variable costs per product?

Unit Contribution Margin = Unit Price - Unit Variable Cost

Unit Contribution Margin Ratio = Unit Contribution Margin / Unit Price

Let's assume a scenario based upon some of the info you provided:

Product A

Price = $100 per unit
Variable cost per unit = $20


Product B

Price = $100 per unit
Variable cost per unit = $30


Contribution Margin for Product A: $100 - $20 = $80 on a per unit basis
Contribution Margin for Product B: $100 - $30 = $70 on a per unit basis

Contribution Margin ratio for A: $80/$100 = 80%
Contribution Margin ratio for B: $70/$100 = 70%

You are trying to determine the per unit Contribution Margin ratio, which is basically asking how much money from the sale of one unit is profit. The ratios of both products will not need to add up to 100% because you are only trying to identify each products individual margin, not the individual products' proportion of total sales. That would be something entirely different from what you are attempting to do.

Thanks, Jakester. Your answer is very helpful.

You are welcome!