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Unformatted text preview: margin –
Reports the same net
income as a traditional income statement.
A statement for internal use only. Chapter
5-25 CVP Income Statement - Example
Vargo Video Company produces a DVD player/recorder.
Relevant data for June 2010: Chapter
Contribution Margin Per Unit
Contribution margin is the amount available to cover fixed costs and to contribute to income. The formula for contribution margin per unit and the
computation of the contribution margin per unit for Vargo
Video are: Thus, for every DVD player sold, Vargo Video has $200 to
cover fixed costs and contribute to net income. Chapter
5-27 CVP Income Statement – Contribution Margin Effect
Since Vargo Video has fixed costs of $200,000, it must sell
1,000 DVD players ($200,000 ÷ $200) before it can earn any
Vargo’s CVP income statement, assuming a zero net income is: Chapter
CVP Income Statement – Contribution Margin Effect
For every DVD player that Vargo sells above 1,000 units, net
income increases by the amount of the contribution margin,
Vargo’s CVP income...
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This document was uploaded on 01/19/2014.
- Winter '14