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Supplemenatary Lecture Slides for the Better Students

# Supplemenatary Lecture Slides for the Better Students -...

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This Lecture Material Addresses the Practical Application of CVP Analysis to Typical Problems If you think you have mastered chapter 6 work through these slides to make sure they make perfect sense to you!

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IDEAL SOLUTION FORMAT SALES SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CONTRIBUTION MARGIN (CM/UNIT) X (UNITS SOLD) FIXED COSTS (TOTAL FIXED COSTS) NET INCOME ? Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point?
First set NI to ZERO to find the breakeven point, then work your way up the Statement: Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point? SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CONTRIBUTION MARGIN (CM/UNIT) X (UNITS SOLD) FIXED COSTS (TOTAL FIXED COSTS) NET INCOME 0 (breakeven)

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Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point? Now plug the given Fixed Costs in the Statement: Now plug the given Fixed Costs in the Statement: SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CONTRIBUTION MARGIN (CM/UNIT) X (UNITS SOLD) FIXED COSTS \$100,000 NET INCOME 0
Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point? Now plug the given Fixed Costs in the Statement: Now plug the given Fixed Costs in the Statement: SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CONTRIBUTION MARGIN (CM/UNIT) X (UNITS SOLD) FIXED COSTS \$100,000 NET INCOME 0

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Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point? Determine the required Contribution Margin that will just cover the Determine the required Contribution Margin that will just cover the Fixed Costs: Fixed Costs: SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CONTRIBUTION MARGIN \$100,000 FIXED COSTS \$100,000 NET INCOME 0 What amount of CM, less the given FC, will end up with zero NI?
Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point? Given that the Contribution Margin per unit is \$50.00, determine how many units (each contributing that amount) must be sold in order to cover the required \$100,000 in Contribution Margin: SALES (SP/UNIT) X (UNITS SOLD) VARIABLE COSTS (VC/UNIT) X (UNITS SOLD) CM (\$50.00 X ?????? ) = \$100,000 FIXED COSTS \$100,000 NET INCOME 0 Knowing that the CM is also given at \$50/unit, and that the required CM is now known to be \$100,000 how many units must be sold to cover the required FC and NI?

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Example: Given that Fixed costs are \$100,000 and the Contribution Margin per unit is \$50.00, How many units would be sold at the break even point?
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