Break Even Analysis On Current Business Environment Post Graduation Essay

518 words - 3 pages

Accounting Notes
Definitions:
Variable Costs (VC) - costs that change, in total, in direct proportion to changes in volume of
activity
Fixed Costs (FC) - costs that do not change, in total, despite changes in production level
Mixed Costs (MC) - costs that have a variable part and a fixed part
Contribution Margin (CM) - excess of sales revenue over variable expenses
Contribution Margin Income Statement Format:
Sales Revenue $1,000,000 $725,000
Variable Expenses:
Variable Manufacturing COGS $100,000
Variable Marketing Expenses 75,000
Variable Distribution Expenses 40,000 215,000
Contribution Margin $785,000 $510,000
Fixed Expenses:
Fixed Manufacturing Expenses $200,000
Fixed Marketing Expenses 45,000
Fixed Distribution Expenses 65,000 310,000
Operating Income $475,000 $ 200,000
Student Learning Assistance Center, San Antonio College, 2004
gmanahan
Typewritten Text
Contribution Margin, Break-even Analysis, Product Costing Methods
Break-Even Analysis:
Break-Even Point - sales level at which operating income is zero. (Total Revenue = Total
Expenses)
Formulas
Contribution Margin = Sales - Variable Costs
Contribution Margin Ratio = Contribution Margin
Sales
Break-Even Point = Fixed Costs + Operating Income
(In Units) CM per unit
Break-Even Point = Fixed Costs + Operating Income
(In Dollars) CM ratio
CVP Graph
Student Learning Assistance Center, San Antonio College, 2004
Margin of Safety - is the excess of the expected Sales over the Break Even Sales
Formulas:
Margin of Safety = Expected Sales - Break Even Sales
(Can be expressed in units or dollars)
Margin of Safety = Margin of Safety
(As a %) Expected Sales
Sales Mix
Sales mix is used for...

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