Computing Multiproduct Break Even Point
Define Break Even Analysis
The unique sales level at which a company earns neither a profit nor incurs a loss
Formula: Dollar Sales At Target Income =
Fixed Costs + Target Income / Contribution Margin Ratio
Sensitivity Analysis
What is the first cost out of the five costs there are ?
Fixed Cost
Break Even Point In Composite Units =
Fixed Costs/ Contribution Margin
Formula: Unit Sales At Target Income =
Fixed Costs + Target Income/ Contribution Margin Per Unit
Degree Of Operating Leverage
DOL = Total Contribution Margin/ Pretax Income
What is the second cost out of the five costs there are?
Variable Costs
Contribution Margin Per Composite Unit =
Selling Price Per Composite Unit - Variable Cost Per Composite Unit
What Is In Computing Sales For A Target Income
Sales
Variable Costs
Contribution Margin
Fixed Costs
Target Income
Operating Leverage
Change In Income = DOL x Change In Sales
What is the third cost out of the five costs there are ?
Mixed Costs
Can CVP formulas be modified for use when a company sells more than one product
Yes they Can!
Computing Income From Sales and Costs
Sales - Variable Costs= Contribution Margin - Fixed Costs = Income (Pretax)
Contribution Margin Per Unit =
Selling Price Per Unit - Total Variable Cost Per Unit
What is the fourth cost out of the five costs ?
Step-Wise Costs
Break Even Formula For Composite Unit Sales
Break Even Points In Composite Units = Fixed Costs/ Contribution Margin Per Composite Unit
Computing The Margin Of Safety
Margin Of Safety (%) = Expected Sales - Break Even Sales/ Expected Sales
Contribution Margin Ratio =
Contribution Margin Per Unit/ Selling Price Per Unit
What is the fifth and final cost out of the five costs ?
Curvilinear Costs