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A
second tool for management decision making that has grown out of
cost/volume/profit analysis is breakeven analysis.
One
of the important, yet relatively simple, tools afforded by
cost/volume/profit analysis is known as contribution margin analysis.
Your company's contribution margin is simply the percentage of each
sales dollar that remains after the variable costs are subtracted.
Once
you've determined your breakeven point, you can use it to examine the
effects of increasing or decreasing the role of fixed costs in your
operating structure.
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