ACTG 1P11 Lecture 2: ACTG+1P11_MAchapter2
Document Summary
Unit variable cost (uvc: indicates the amount each unit contributes to first paying fixed costs, then providing a profit, contribution margin ratio (cmr) = total cm/ total sales. It is a measure of income sensitivity: a higher ratio indicates greater risk, but also higher reward potential due to changes in sales level. (highest at. Bep and will decrease as we move away from bep. : n. b. : the degree of operating leverage is not constant it changes with the level of sales. It is greatest at sales levels near the break-even point and declines as sales increase: contribution margin vs. Lecture examples: nord corporation, a bicycle manufacturer, presents the following contribution margin format income statement for its most recent month. Use this information to calculate: the unit contribution margin and contribution margin ratio, the break-even point in units and in dollars, the number of units needed to be sold to earn a target profit of ,00.
