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Lecture 4

Week 4 - Ch. 4

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ACC 406
Alison Beavis

ACC 406Week FourCostVolume Profit AnalysisCan Calculate Of units that must be sold to break evenImpact of an increase in price on profitImpact of a given reduction in fixed costs on the breakeven pointTOTAL REVENUETOTAL COSTContribution MarginSALESVARIABLE EXPENSESCONTRIBUTION MARGINCONTRIBUTION MARGINFIXED COSTOPERATING INCOMEIncome statement divides costs based on behaviorCosts are divided into variable and fixedSales revenuevariable expensesBreak even point is when operating income0How to prepare a contribution margin income statementEx Whittier Co plans to sell 1000 mowers at 400each Costs includeDirect materials 180eachDirect labor 100eachVariable over head 25eachTotal fixed factory over head 15000Variable expense is commission of 20Fixed selling and admin costs of 300001 Calculate Variable CostVariable cost per unitdirect materialsdirect laborvariable overheadvariable selling exp1801002520 325unit2 Calculate fixed expenseTotal fixed expensefixed over headfixed sellingadmin expense1500030000450003 Margin income statement
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