FINC 577 Chapter 5 Notes Outline

Statement contribution margin reports

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Unformatted text preview: margin – _________________________ _________________________. Reports the same net income as a traditional income statement. income A statement for internal use only. Chapter 5-25 CVP Income Statement - Example Vargo Video Company produces a DVD player/recorder. Relevant Relevant data for June 2010: Chapter 5-26 Contribution 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 Th an computation 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 net income. Vargo’s CVP income statement, assuming a zero net income is: Chapter 5-28 CVP 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, $200. Vargo’s CVP income...
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This document was uploaded on 01/19/2014.

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