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14 Cards in this Set
- Front
- Back
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What does contribution margin tell us? |
How much we have available to cover fixed expenses |
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What does cost volume profit analysis do? |
Lets companies know how changes in all of the company of a contribution margin income statement interacts to affect net operating income |
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Net operating income equation |
*Total Sales - Total Variable Expenses - Total Fixed Expenses *PQ - VQ- Fixed *(P-V) Q - Fixed *(Unit CM)Q - Fixed |
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Total sales equation |
*P x Q *Total Fixed ÷ CM Ratio |
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Total variable expense equation |
V x Q |
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Total contribution margin equation |
*PQ-VQ *(P-V)Q * (Unit CM)Q *P-V |
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Why is Break Even Point important? |
It shows the level of sales at which a company begins to make a profit |
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Two types of break-even calculations |
*Equation method *Contribution margin method |
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Break Even equation method |
PQ - VQ - Fixed Expenses |
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What does the break even equation method also calculate? |
How much total sales must be to break even |
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Break Even equation method sales equation |
B/E Total Sales= Price x B/E Quantity |
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B/E CM Method Equation |
1. NOI = (Unit CM)Q - Fixed 2. -0- = (Unit CM)Q -Fixed 3. Fixed = (Unit CM)Q 4. Fixed ÷ Unit CM = Q |
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B/E Sales CM Method |
Fixed ÷ CM Ratio |
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CM Ratio |
*PQ - VP ÷ PQ *Total CM ÷ Sales *Unit CM ÷ Sales * P - V ÷ P |
