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hello and welcome to the session in which we would look at the contribution margin ratio when we say ratio it means a percentage in the prior session we look at the contribution margin how do we compute the contribution margin in this session were going to be looking more at the contribution margin ratio and how do we use this ratio to make business decisions so what is the contribution margin well its the selling price minus the variable cost simply put if we have a product and were selling a product for ten dollars its costing us six dollars to buy the product six ten minus six will give us a contribution margin of four dollars per one unit now we can take this information and compute a percentage to figure out how much each unit we are selling is contributing to our margin to our contribution margin well to compute the contribution margin ratio which is a percentage well take the contribution margin which is four dollars as computed above divided by the sales sales is ten dolla