6-1 The contribution margin (CM) ratio is
the ratio of the total contribution margin to total
sales at which profits are zero. It can also be
sales revenue. It can be used in a variety of
defined as the point where total revenue equals
total cost, and as the point where total contribu-
ways. For example, the change in total contribu-
tion margin from a given change in total sales
tion margin equals total fixed cost.
revenue can be estimated by multiplying the
change in total sales revenue by the CM ratio. If
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