Unformatted text preview: statement, assuming 1001 units sold is: Chapter
5-29 Contribution Margin Ratio
Shows the percentage of each sales dollar available to apply
toward fixed costs and profits.
The contribution margin ratio is the contribution margin per
unit divided by the unit selling price. For Vargo Company, the
computation is: In this case, the contribution margin ratio of 40% means
that $ 0.40 of each sales dollar is available to apply to fixed
costs and contribute to net income. Chapter
Contribution Margin Ratio
As shown below, the contribution margin ratio
helps to determine the effect of changes in sales
on net income. Chapter
5-31 BreakBreak-Even Analysis
A key relationship in CVP analysis is the level of activity at
which total revenue equals total costs (both fixed and
variable). This level of activity is called the break-even point.
At this volume of sales, the company will realize no income, but
will also suffer no loss.
Can be computed or derived:
from a ____________________,
by using ____________________or
from a cost-volume profit __________.
The break-even point can...
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- Winter '14
- Finance, Vargo Video