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Unformatted text preview: he total-sales line starting at the
zero activity level,
Plot the total fixed cost using a
Plot the total-cost line (starts at the
fixed-cost line at zero activity),
Determine the break-even point from
the intersection of the total-cost
line and the total-sales line. Chapter
5-36 BreakBreak-Even Analysis: Graphic Presentation Chapter
5-37 BreakBreak-Even Analysis: Target Net Income
Rather than just breaking even, management usually
sets an income objective called “target net income.” Indicates sales or units necessary to achieve this
specified level of income.
Can be determined from each of the approaches used
to determine break-even sales/units:
break- From a mathematical equation,
By using contribution margin, or
From a cost-volume profit (CVP) graph.
Expressed either in sales units or in sales dollars.
5-38 BreakBreak-Even Analysis: Target Net Income
Using the basic formula for the break-even point, simply include the desired net income as a factor.
The computation for Vargo Video is...
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- Winter '14