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    Cost Accounting CHP 3 CVP

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    dangminhphuongg
    The document discusses contribution margin income statements and break-even analysis. It provides calculations and examples for contribution margin, contribution margin ratio, total variable expenses, operating leverage, target profit sales, margin of safety, and how these metrics are used to analyze sales, costs, profits, and break-even points.

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    Cost Accounting CHP 3 CVP

    Uploaded by

    dangminhphuongg
    9 views2 pages
    The document discusses contribution margin income statements and break-even analysis. It provides calculations and examples for contribution margin, contribution margin ratio, total variable expenses, operating leverage, target profit sales, margin of safety, and how these metrics are used to analyze sales, costs, profits, and break-even points.

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    Cost Accounting Chp 3 CVP

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    The document discusses contribution margin income statements and break-even analysis. It provides calculations and examples for contribution margin, contribution margin ratio, total variable expenses, operating leverage, target profit sales, margin of safety, and how these metrics are used to analyze sales, costs, profits, and break-even points.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    9 views2 pages

    Cost Accounting CHP 3 CVP

    Uploaded by

    dangminhphuongg
    The document discusses contribution margin income statements and break-even analysis. It provides calculations and examples for contribution margin, contribution margin ratio, total variable expenses, operating leverage, target profit sales, margin of safety, and how these metrics are used to analyze sales, costs, profits, and break-even points.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    You are on page 1of 2

    Contribution Margin Income Statement

    Selling Price SP = $ 10.00 Breakeven Analysis (BE)


    Variable Cost of Manufacturing VC = $ 4.00 Revenue = Cost
    Variable selling expense VSE = $ 2.00 PXQ = VC X Q + FC
    Variable administration expense VAE = $ 1.00 0 = Revenue - Cost
    Total variable cost/expense TVE = $ 7.00 0 = PXQ - VC X Q - FC
    Contribution margin CM = $ 3.00 FC = Q X (P - VC)
    Contribution margin ratio CM% = 30% FC/(P - VC) = Q
    FC/CM = Q (BE)
    TVE% = 70% Q (BE) X P = $ Sales (BE)
    FC/CM% = $ Sales (BE) 0 = CM% X Sales - FC
    FC/CM% = $ Sales (BE)
    If we produce and sell 1000 units Q (BE) = 500
    $ (BE) = $ 5,000
    Sales $ 10,000
    VCOGS $ 4,000 Proof ← Proof FC/CM% $ 5,000
    VSE $ 2,000 Sales $ 5,000.00
    VAE $ 1,000 TVC $ 3,500.00
    CM $ 3,000 CM $ 1,500.00
    Fixed manufacturing expense FMOH $ 1,000 FMOH $ 1,000
    Fixed selling and administartion expense FS&AE $ 500 FS&AE $ 500
    Net operating income NOI $ 1,500 NOI $ -

    Operating Leverage (OL) Profit


    OL = CM/NOI
    OL = 2.0 Profit = CM% X Sales - FC
    That means if sales increase by (let`s say) 30% NOI will increase by 60%

    Proof Sales $ 13,000 Profit = $ 2,400.00


    VCOGS $ 5,200
    VSE $ 2,600 $ Target Profit Sales = (TP+FC)/CM%
    VAE $ 1,300 ← = $ 13,000
    CM $ 3,900
    FMOH $ 1,000 Q Target Profit Sales = (TP+FC)/CM (per unit)
    FS&AE $ 500 ← = 1300
    NOI increase $ 2,400 NOI $ 2,400 $ Margin of Safety = $ Sales - $ (BE)
    Q Margin of Safety = Q Sales - Q (BE)
    ← $MS = $ 8,000.00
    Sales mix: PPS 95 QMS = 800
    Sales mix $ (BE) = CFC/CCM%
    CFC: Common FC, CCM: Common Contribution Margin
    Price: $4,000 Price: $4,000
    VC: $1,200 VC: $1,200
    FC: $134,400 FC: $134,400
    Profit: ($22,400) Profit: $0
    Volume: 40 Volume: 48

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