MGAB03H3 Chapter Notes -Variable Cost, Operational Risk, Zirconium
Document Summary
Profit = total revenue total variable costs total fixed costs. N cvp analysis begins with the basic profit equation: N separating costs into variable and fixed categories: N contribution margin (cm) total revenues minus total variable costs. N contribution margin per unit (cmu) selling price per unit minus variable cost per unit. N both contribution margin and cmu are valuable tools when considering the effects of volume on profit. N cmu tells how much revenue from each unit sold can be applied towards fc or contributed to cover fc. V = variable cost per unit (s v) = contribution margin per unit (cmu) Q = quantity of product sold (units of goods or services) Ebt = s q v q f = (s v) q f. N cvp analysis can be performed using either: units (quantity) of product sold or revenues (in dollars)
