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
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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
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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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