chapter_3

The formula to nd the target volume in units is

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Unformatted text preview: f 6,250 prints generates revenue of $3,750). Orientation Target Volume in Units To find the target volume, we use the profit equation with the target profit specified. The formula to find the target volume in units is Target profit _Fixed costs _______________________ and Organizing Yourself Using the data from U-Develop, we find the volume that provides an operating profit of for Success in College Target volume (units) Preparing Contribution margin per unit $1,800 as follows: Target volume Target profit _Fixed costs _______________________ Contribution margin per unit $1,500 $1,800 ______________ $.24 13,750 prints U-Develop must sell 13,750 prints per month to achieve the target profit of $1,800. Each additional print sold increases operating profits by $.24. CH P ERS Target Volume in Sales Dollars To find the target volume in sales dollars,A weT use the I N P A R T O N contribution margin ratio instead of the contribution margin per unit. The formula to find the target volume follows: 1 Making Yourself Successful in College Target volume (sales dollars) E Fixed costs Target profit ______________________ Contribution margin ratio 2 Approaching College Reading and For U-Develop the target volume expressed in sales dollars is Developing a College-Level Vocabulary Target volume (sales dollars) $1,500 $1,800 ______________ 3 .Approaching College Assignments: 40 Note that sales dollars of $8,250 translates into 13,750 printsReadingeach. We getand Following Directions at $.60 Textbooks the same target volume whether expressed in units (13,750 prints) or dollars (sales of 13,750 prints generates revenue of $8,250). Exhibit 3.2 summarizes the four formulas for finding break-even and target volumes. Exhibit ✓ Related Resources 3.2 Break-Even Volume Break-even volume (units) Break-even volume (sales dollars) Fixed costs ____________________ Unit contribution margin Fixed costs ____________________ Contribution margin ratio Target Volume Target volume (units) Fixed costs Target profit ______________________ Target volume (sales dollars) tions related to the chapters in Part One. 1 Fixed costs Target profit ______________________ cor50782_ch01_001-072.indd 1 lan27114_ch03_080-109.indd 85 Summary ofpages 000 to 000 See BreakEven and Target Volume of the Annotated Instructor’s Formulas Edition for general sugges- Unit contribution margin Contribution margin ratio 10/5/09 11:09:29 PM 10/22/09 10:33:53 PM REVISED PAGES Part II 86 Cost Analysis and Estimation Exhibit 3.3 CVP Graph—U-Develop PART $8,000 Revenues, Costs $7,000 $6,000 $5,000 TC $4,000 Total cost $1,500 $.36 X 1 Orientation $5,820 Break even TR TC $3,000 Preparing and Organizing Yourself for Success in College Total revenue $2,000 $1,000 $0 $7,200 TR 0 2,000 4,000 $.60 X 6,000 8,000 10,000 12,000 Volume per period (X ) Graphic Presentation Exhibit 3.3 presents the cost-volume-profit (CVP) relations for U-Develop in a graph. Such a graph is a helpful aid in presenting cost-volume-profit relationships. We plot dollars on the vertical axis (revenue...
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