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Unformatted text preview: be expressed either in sales units or
in sales dollars.
Chapter
532 BreakBreakEven Analysis: Mathematical Equation
Breakeven occurs where total sales equal variable
costs plus fixed costs; i.e., net income is zero.
The
The formula for the breakeven point in units and
the
the computation for Vargo Video are: To find sales dollars required to breakeven:
sales
break 1,000 units × $500 = $500,000 (breakeven sales dollars).
(break Chapter
533 BreakBreakEven Analysis:
Contribution Margin Technique
At the breakeven point, contribution margin must equal
At total fixed costs. (Contribution Margin = Total revenues – Variable costs)
The breakeven point (BEP) can be computed using either
contribution margin per unit or contribution margin ratio. Chapter
534 Contribution
Contribution Margin Technique
When the contribution margin per unit is used, the
formula to compute the BEP in units for Vargo Video
is: When the BEP in dollars is desired, contribution
margin ratio is used in the following formula for
Vargo Video: Chapter
535 BreakBreakEven Analysis: Graphic Presentation
A costvolume profit (CVP) graph shows the
relationships between costs, volume and profits.
To construct a CVP graph: Plot t...
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This document was uploaded on 01/19/2014.
 Winter '14
 Finance

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