COMM 112 Chapter 4: 112 Chapter 4.docx

• School: Queen's University
• Department: Commerce
• Course: COMM 112
• Professor: Teri Shearer

Document Summary

Cost-volume profit (cvp) analysis estimates how change sin costs, sales volume, and price affect a company"s profit. Recall: income statement is divided by manufacturing, selling and administrative fuctions. Unit contribution margin = sales price per unit variable cost per unit. Contribution margin ratio = contribution margin / sales. Change in income from operations = change in sales dollars x contribution margin ratio. Change in income from operations = change in sales units x unit contribution margin. Variable costs = 100% - contribution margin ratio % Operating income = sales variable expenses total fixed expenses. = (price x # of units sold) (variable cost per unit x # units sold) total fixed cost. Break even point in units = total fixed cost / (price variable cost per unit) Break even point in sales dollars = total fixed expenses / contribution margin ratio. Just take the breakeven units and multiply it by price.