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Unformatted text preview: as follows: Chapter
5-39 BreakBreak-Even Analysis: Target Net Income
Contribution Margin Technique
To determine the required sales in units for Vargo
Video: To determine the required sales in dollars for Vargo
5-40 BreakBreak-Even Analysis: Margin of Safety
Difference between ____________________ and
sales at the _________________________.
Measures the “cushion” that management has,
allowing it to break-even even if expected sales fail
May be expressed in dollars or as a ratio.
To determine the margin of safety in dollars for
Vargo Video assuming that actual/expected sales are
5-41 BreakBreak-Even Analysis: Margin of Safety
Margin of Safety Ratio
Computed by dividing the margin of safety in dollars
by the actual or expected sales.
To determine the margin of safety ratio for Vargo
Video assuming that actual/expected sales are
$750,000: The higher the dollars or the percentage, the
greater the margin of safety.
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- Winter '14