[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:05.12,0:00:09.99,Default,,0000,0000,0000,,Contribution margin is the difference\Nbetween sales revenue and variable cost.
Dialogue: 0,0:00:09.99,0:00:12.93,Default,,0000,0000,0000,,it allows a company \Nto determine the profitability
Dialogue: 0,0:00:12.93,0:00:17.41,Default,,0000,0000,0000,,of individual products by\Nmeasuring how sales affect profits.
Dialogue: 0,0:00:17.41,0:00:21.34,Default,,0000,0000,0000,,In its ratio form, it is calculated \Nas contribution margin
Dialogue: 0,0:00:21.34,0:00:23.84,Default,,0000,0000,0000,,divided by sales revenue.
Dialogue: 0,0:00:23.84,0:00:26.10,Default,,0000,0000,0000,,While revenue from a company's product
Dialogue: 0,0:00:26.10,0:00:28.68,Default,,0000,0000,0000,,is how much money the company makes from selling that item,
Dialogue: 0,0:00:28.68,0:00:32.18,Default,,0000,0000,0000,,a product's variable costs include those expenses
Dialogue: 0,0:00:32.18,0:00:35.80,Default,,0000,0000,0000,,that vary depending on the company's production volume.
Dialogue: 0,0:00:35.80,0:00:39.39,Default,,0000,0000,0000,,A business owner, Ida might\Nuse contribution margin figures
Dialogue: 0,0:00:39.39,0:00:41.62,Default,,0000,0000,0000,,to decide which \Nproducts costs,
Dialogue: 0,0:00:41.62,0:00:44.83,Default,,0000,0000,0000,,he should reduce or\Nwhich price he should increase.
Dialogue: 0,0:00:44.83,0:00:48.58,Default,,0000,0000,0000,,For example, \Nif a pair of jeans sells for $100,
Dialogue: 0,0:00:48.71,0:00:56.18,Default,,0000,0000,0000,,and its variable costs are $65,\Nits contribution margin is $35 or 35%.
Dialogue: 0,0:00:56.18,0:01:01.18,Default,,0000,0000,0000,,This means that for each dollar \Nof sales, profit increases by 35 cents.
Dialogue: 0,0:01:01.18,0:01:05.11,Default,,0000,0000,0000,,Ida wants to see a \Ncontribution margin ratio of 50%.
Dialogue: 0,0:01:05.11,0:01:06.80,Default,,0000,0000,0000,,He determines\Nhe can achieve this
Dialogue: 0,0:01:06.80,0:01:09.81,Default,,0000,0000,0000,,either by reducing \Nvariable cost to $50
Dialogue: 0,0:01:09.81,0:01:13.45,Default,,0000,0000,0000,,by increasing the price\Nof jeans to $130,
Dialogue: 0,0:01:13.45,0:01:16.00,Default,,0000,0000,0000,,or through some \Ncombination of the two.
Dialogue: 0,0:01:16.00,0:01:18.80,Default,,0000,0000,0000,,Another option is to quit\Nselling jeans entirely,
Dialogue: 0,0:01:18.80,0:01:22.07,Default,,0000,0000,0000,,and focus on other products\Nsuch as button-down shirts,
Dialogue: 0,0:01:22.29,0:01:26.33,Default,,0000,0000,0000,,which already have a \Ncontribution margin of at least 50%.
Dialogue: 0,0:01:26.33,0:01:29.05,Default,,0000,0000,0000,,Ida might also want to\Ncalculate the contribution margin
Dialogue: 0,0:01:29.05,0:01:31.39,Default,,0000,0000,0000,,for all of his\Nproducts in sum.
Dialogue: 0,0:01:31.39,0:01:38.02,Default,,0000,0000,0000,,If total variable costs re $750,000,\Nand total sales are 1.5 million dollars,
Dialogue: 0,0:01:38.36,0:01:42.48,Default,,0000,0000,0000,,the total contribution margin\Nin ratio form will be 50%.
Dialogue: 0,0:01:42.48,0:01:45.15,Default,,0000,0000,0000,,The business could compare\Nthe contribution margins
Dialogue: 0,0:01:45.15,0:01:49.54,Default,,0000,0000,0000,,of individual products against\Nthe company's total contribution margin
Dialogue: 0,0:01:49.54,0:01:54.43,Default,,0000,0000,0000,,to determine which products to sell\Nmore of, or which to sell less off.
Dialogue: 0,0:01:54.43,0:01:57.62,Default,,0000,0000,0000,,If dress slacks have a\Ncontribution margin of 60%,
Dialogue: 0,0:01:57.62,0:01:59.86,Default,,0000,0000,0000,,and it is possible\Nto sell more of them
Dialogue: 0,0:01:59.86,0:02:04.75,Default,,0000,0000,0000,,at the same price total\Ncontribution margin will rise.