ACC 406 Lecture Notes - Lecture 4: Fixed Cost

• School: Ryerson University
• Department: Accounting
• Course: ACC 406
• Professor: Alison Beavis

Document Summary

# of units that must be sold to break even. Impact of an increase in price on profit. Impact of a given reduction in fixed costs on the break-even point. Contribution margin fixed cost = operating income. Costs are divided into variable and fixed. Break even point is when operating income = sh. How to prepare a contribution margin income statement. Ex: whittier co. plans to sell 1,000 mowers at /each. Fixed selling and admin costs of 30,000 (1) calculate variable cost. Variable cost per unit = direct materials + direct labor + variable overhead + variable selling exp. Total fixed expense = fixed over head + fixed selling & admin expense. Break even = total fixed cost contribution margin per unit. = 600 \ must sell 600 mowers to break even. Variable cost ratio = variable cost sale price. Contribution margin per unit = sales variable cost. For the coming year ( x 1000 mowers)