Chapter_3

# Chapter_3 - Cost-Volume-Profit Analysis Mountain Biking Inc...

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Cost-Volume-Profit Analysis

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Mountain Biking, Inc. Sells four different models Best selling model is the MB 80 Selling Price per unit \$500 Variable Cost per unit \$300 Unit contribution margin \$200 Fixed Costs for the MB 80 \$80,000 per year
Relationships among Unit Sales, Contribution Margin and Net Income Unit Sales Contribution Margin Net Income 0 \$0 (\$80,000) 1 \$200 (\$79,800) 400 \$80,000 \$0 401 \$80,200 \$200

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Breakeven Analysis: Terms P is the selling price per unit N is the number of units sold V is the variable cost per unit FC is the total fixed costs for the period (year) NI is the net income
CM Income Statement as an Equation The basic sales equation is equivalent to looking at the contribution margin income statement: Sales Revenue => P x N Less: Variable Costs => V x N Contribution Margin => (P-V) x N Less: Fixed Costs => FC Net Income => NI Which N produces enough contribution margin to cover FC and contribute to NI?

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CM Income Statement as an Equation Basic Net Income Equation:
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