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Finance Formulas / July 13, 2018 / Rory Wise

The contribution margin is an integral aspect when calculating the break-even point of sales or a target level of sales. The contribution margin determines the portion of each sale that is attributed to covering fixed costs. For this reason, fixed costs divided by the contribution margin results in the number of units needed to be sold to break-even. To find a target net income, the target amount is added to total fixed costs.

Meanwhile, upset that he is only earning $40 per year, the original investor decides to sell, but to entice others to buy his bond instead of bonds directly from ABC Corporation, he lowers his price. For example, he lowers it to $650, making its effective annual yield $40$650 or 6.15%. If the bond issuer had not increased its rates, the investor might not have had to sell his bond for less than its face value.

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