MGT223H5 Chapter Notes - Chapter 07: Contribution Margin, Fixed Cost, Earnings Before Interest And Taxes
Document Summary
Total contribution margin = sales variable costs. Contribution margin per unit = price variable cost per unit. Break-even-point (bep): when profit is zero (sales vc fc = 0) Break-even-point in units: number of units to sell to break even = x: equation method: X*sales per unit x*vc per unit fc = 0: contribution margin method: Break-even-point in dollars: amount of sales to break even = x: equation method: X x*(1-cm ratio) fc = 0: contribution margin method: * the relationship among revenue, cost, profit and volume can be expressed graphically by preparing a cvp graph. In a cvp graph, unit is on the horizontal axis and dollars on the vertical axis. Sales = variable expense + fixed expense + profit: contribution margin method: Target operation profit before tax (nibt) = (1-tax rate) Margin of safety: excess of budgeted (or actual) sales over the break-even volume of sales. Margin of safety in dollars = total sales break-even sales.
