Jan 28, 2008 - 1. Decision Point where INCREMENTAL...

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Key points from last class 1. CVP o Cost, volume, profit o Have to be able to separate Fixed vs. Variable cost Variable cost change in direct proportion to the sales volume 2. Breakeven o Use - assessing risk, margin of safety o Method of calculating Chart Algebraic method : TR=TC Concept of Contribution Contribution margin - with units (P-VC) 3. Finance – Review o What is Contribution The amount that remains from the sale after VARIABLE Costs are  covered, which contributes toward covering FIXED Costs o Contribution margin = price/(unit - variable cost/unit) o Margin of Safety: Current Sales – Breakeven o Unit Contribution Margin = Price – VC o Fixed Cost/Unit Contribution Margin = units required to sell in order to  cover fixed costs Lecture Contribution margin
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Unformatted text preview: 1. Decision Point where INCREMENTAL (additional) fixed costs are covered by INCREMENTAL contribution 2. What is left over after covering variable costs that contributes toward covering fixed costs? 3. Use ratio cant do it on a per unit basis o What % of every sales dollar is left over after covering variable costs that contributes toward covering fixed costs? 4. Analysis o Qualitative o Quantitative (Contribution) Contribution rate 5. When there are only total value given 6. Contribution rate = 1-VC/Sales 7. What do our total $ Sales have to be at contribution rate of 1- (VC/Sales) to cover fixed costs? 8. Margin = FC/(Contribution Rate) = FC/(1- VC/Sales)...
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Jan 28, 2008 - 1. Decision Point where INCREMENTAL...

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