Chapters 3 - 5 Notes.docx

# Unit contribution margin break even in units fixed

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Break-even volume (in units) = fixed costs /. Unit contribution margin Break-even in units = fixed costs / (selling price per unit – variable cost per unit) Break-even volume in sales dollars = unit contribution margin / sales price per unit Break-even volume sales dollars = fixed costs / contribution margin ratio Target volume (units) = (fixed costs + target profit) / contribution margin per unit Target volume (sales dollars) = (fixed costs + target profit)/Contribution margin ratio Income taxes o After-tax profit = [(P-V)X -F] x (1-t) o Target volume in units = (fixed costs + (target profit / (1-t))/ contribution margin o Chapter 4 If the special order price is higher than the variable costs, there will be a profit

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Chapter 5 The cost equation is TC = F + VX When using the high-low method, the equation that represents the slope of the total cost line (variable cost per unit) is (high cost – low cost)/(high activity level – low activity level) Variable cost per unit (v) = (cost at highest activity level – cost at lowest activity level) / (highest activity level – lowest activity level) Fixed cost = total cost at highest activity level – (variable cost x highest activity level) Presentation Break-even (calculations, margin of safety, taxes, multiproduct) The margin of safety lets the manager know the difference between break-even and the current sales point Homework
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• Fall '11
• DR.HANN
• sales volume, average contribution margin

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