RSM222H1 Chapter Notes - Chapter 7: Tjust, Finished Good, Contribution Margin
Document Summary
Cvp focuses on how profits are affected by: prices of products, volume/activity level, per unit variable costs, total fixed costs, mix of products sold. Contribution income statement emphasizes the behaviour of costs, which reports sales, variable expenses, and contribution margin on both a total and per-unit basis. Contribution margin the amount remaining from sales revenue after variable expenses have been deducted. It"s the amount available to cover fixed expenses and provide profits. Breakeven point the level of sales at which profit is zero. Point where total sales = total expenses, or when total cm = total fc. Once this point has been reached, income will increase by the cm for each additional unit sold. Can be calculated using total cm/total sales or on a per-unit basis. It measures how much the contribution margin will increase for each dollar increase in sales. Operating income will also increase by the contribution margin if fixed costs do not change.
