Solutions for Tutorial 7
12.7
Perunit contribution is critical to breakeven analysis in order for a company
to determine how many units are required to be sold to cover the company’s
fixed costs. The underlying known variable is the dollar amount of the
contribution margin the company will generate from each unit sold in order to
make the above calculation. Equations 12.4 and 12.6 demonstrate the
calculation
for
EBITDA
and
EBIT
breakeven
points.
The
term
in
the
denominator (PriceUnit VC) represents the perunit cash flow contribution.
12.8
Simulation analysis is like scenario analysis except that in simulation analysis
an analyst typically uses a computer to examine a large number of scenarios
in a short period of time. Rather than selecting individual values for each of
the assumptions—such as unit sales, unit price, and unit variable costs—the
analyst assumes that those assumptions can be represented by statistical
distributions. The computer then draws upon the distribution of each variable
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 Three '10
 martin
 scenario planning, analyst, EBIT breakeven points, cash flow contribution

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