MGMT 30B Lecture Notes - Lecture 9: Indian Railways, Net Income, Contribution Margin
8 Jun 2016
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Lecture 9 february 4: absorption costing, cost-volume-profit relationships. Variable cost ratio: how variable costs are comparing to total sales. Variable expense ratio = total variable expense / total (a. 1. a. i) Variable expense ratio = 1 contribution margin. A. 2) questions which can be answered (a. 2. a) what happens if sales, variable costs or fixed costs change? (a. 2. a. i) Prepare contribution income statement for current costs/sales. Prepare contribution income statement for changed costs/sales. Calculate difference between current and changed statements (a. 2. b) what sales are required to achieve a specific profit amount? (a. 2. b. i) Target profit = (unit contribution margin x total sales (in units)) Target profit = (contribution margin x total sales (in dollars)) . Lecture 10 february 6: only variable manufacturing costs are assigned to units of products produced. Only manufacturing costs that vary with output are treated as product costs (a. 1. b) (a. 1. c) Steps to prepare a variable costing contribution format income statement: (a. 2. a) + direct labor + variable manufacturing overhead (a. 2. b)
