Question

Several different approaches or methods we can use to model the relationship between revenues, costs, profit, and volume, including the following:

a)Profit Equation Method
b)Unit Contribution Margin Method
c)Contribution Margin Ratio Method

Answer 1

There are three methods to model the relationship between revenues, costs, profit, and volume: Profit Equation Method, Unit Contribution Margin Method, and Contribution Margin Ratio Method.

Step-by-step explanation:

There are several different approaches or methods that can be used to model the relationship between revenues, costs, profit, and volume:

Profit Equation Method: This method uses a formula to calculate the profit based on the difference between revenues and costs. The formula is: Profit = Revenues - Costs.

Unit Contribution Margin Method: This method calculates the profit by subtracting the unit variable cost from the unit selling price and then multiplying it by the volume of units sold. The formula is: Profit = (Unit Selling Price - Unit Variable Cost) * Volume.

Contribution Margin Ratio Method: This method calculates the profit by subtracting the total variable cost from the total revenue and then dividing it by the total revenue. The formula is: Profit = (Total Revenue - Total Variable Cost) / Total Revenue.