ACC 406 Lecture Notes - Lecture 3: Contribution Margin, Earnings Before Interest And Taxes, Management Accounting

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This powerful tool for planning and decision making can be used to calculate: The number of units that must be sold to break even. The impact of a given reduction in fixed costs on the break-even point. The impact of an increase in price on profit. Break-even point (bep) is where profits (operating income) are 0. Total revenue total cost = zero profit. The income statement format is based on the separation of costs into fixed and variable components is called the contribution margin income statement. Variable selling expense (commission), per mower. Fixed selling and administrative expense, ,000: calculate the total variable cost per unit, calculate the total fixed expense for the year, prepare a contribution margin income statement for whittier co. for the coming year. The contribution margin income statement shows a total contribution margin of ,000. The per-unit contribution margin is (= -) That is, every mower sold contributes toward fixed expense and operating income.

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