Calculating the Contribution Margin
The Mental Health program for the Community Center has just completed its
fiscal year end. The program director determines that his program has revenue for the
year of $1,210,000. He believes his variable expense amounts to $205,000 and knows his
fixed expense amounts to $1,100,000.
1. Compute the contribution margin for the Community Center Mental Health
The contribution margin for the Community Center Mental Health Program is as follows:
Less Variable Cost
Less Fixed Cost
2. What does the result tell you about the program?
There is a loss of $95,000 in the program; therefore, the program’s contribution margin
does not cover the fixed costs.