Chapter+4+Review

Chapter+4+Review - Chapter 4 Review Break-even Total...

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Chapter 4 Review Break-even Total revenues are equal to Total Costs There are no profits or loss Contribution Margin Sales less variable costs What’s left from sales after subtracting all variable costs, (variable manufacturing, variable selling and variable administrative costs) CM used to cover fixed costs then accumulates as operating income Contribution Margin Income Statement Divides costs based on behavior versus function Costs are divided into variable and fixed components Behavior IS: Functional IS: Sales – CGS (product cost) = GM – Sell – Admin (period cost) = OI Break Even Formula in Units = FC / (Seliing Price – VC per unit) or FC / CM per unit Variable Cost Ratio = VC / Sales (done per unit or in total) - Portion of each sales dollar used to cover VC. Or VC ratio = 100% - CM ratio. Contribution Margin Ratio = CM / Sales
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This note was uploaded on 09/23/2011 for the course ACCT 2362 taught by Professor Eure during the Spring '11 term at Texas State.

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Chapter+4+Review - Chapter 4 Review Break-even Total...

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