BUS 254 Chapter Notes - Chapter 7.1: Contribution Margin, Fixed Cost, Income Statement

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Michelle Iorio

Document Summary

Example: city will receive a rental charge of ,000/month and /theatre ticket sold. Break-even point: volume of activity at which the organization"s revenues and expenses are equal. Organization has no profit or loss; it breaks even. The following income statement shows a 0 profit the theatre will break even. Total contribution margin: total sales revenue less total variable expenses: amount of revenue available to contribute toward paying fixed expenses after variable expenses have been covered. Unit contribution margin: selling price less the variable expenses. (cid:1828)(cid:1870)(cid:1857)(cid:1853)(cid:1863)-(cid:1831)(cid:1874)(cid:1857)(cid:1866) (cid:1867)(cid:1866)(cid:1872) (cid:4666)(cid:1830)(cid:1867)(cid:1864)(cid:1864)(cid:1853)(cid:1870)(cid:1871)(cid:4667)= (cid:3007)(cid:3032)(cid:3031) (cid:3006)(cid:3043)(cid:3032)(cid:3041)(cid:3046)(cid:3032)(cid:3046) (cid:3022)(cid:3041)(cid:3047) (cid:3004)(cid:3042)(cid:3041)(cid:3047)(cid:3045)(cid:3029)(cid:3048)(cid:3047)(cid:3042)(cid:3041) (cid:3014)(cid:3028)(cid:3045)(cid:3034)(cid:3041) (cid:3007)(cid:3032)(cid:3031) (cid:3006)(cid:3043)(cid:3032)(cid:3041)(cid:3046)(cid:3032)(cid:3046) (cid:3289)(cid:3295) (cid:3290)(cid:3289)(cid:3295)(cid:3293)(cid:3277)(cid:3296)(cid:3295)(cid:3290)(cid:3289) (cid:3276)(cid:3293)(cid:3289) (cid:3289)(cid:3295) (cid:3276)(cid:3294) Contribution-margin ratio: unit contribution margin divided by the unit sales price. = sales revenue variable expenses fixed expenses. = [(unit sales price)(sales volume in units)] [(unit variable expense)(sales volume in units) (fixed. Orange section denotes the fixed expense portion. Tr < te: loss generating more expenses than revenue. Tr > te: profit generating more than enough revenue to cover expenses.