Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Chapter Six
Contribution
Contribution Margin
Margin (CM)
(CM) is
is the
the amount
amount
remaining
remaining from
from sales
sales revenue
revenue after
after variable
variable
expenses
expenses have
have been
been deducted.
deducted.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Basics of Cost-Volume-Profit Analysis
If Racing sells
430 bikes, its
net income will
be $6,000.
Income
Income Income
Income Income
Income
300
300 units
units 400
400 units
units 500
500 units
units
Sales
Sales $$ 150,000
150,000 $$ 200,000
200,000 $$250,000
250,000
Less:
Less: variable
variable expenses
expenses 90,000
90,000 120,000
120,000 150,000
150,000
Contribution
Contribution margin
margin $$ 60,000
60,000 $$ 80,000
80,000 $$100,000
100,000
Less:
Less: fixed
fixed expenses
expenses 80,000
80,000 80,000
80,000 80,000
80,000
Net
Net operating
operating income
income $$ (20,000)
(20,000) $$ -- $$ 20,000
20,000
Units
Fixed Expenses
Units
Total Expenses
Fixed Expenses
Units
Total Sales
Dollars
Total Expenses
Fixed Expenses
Units
Break-even point
(400 units or $200,000 in sales)
re a
fi t A
Pro
Dollars
r e a
s A
L o s
Units
$200 = 40%
$500
400
400 Bikes
Bikes 500
500 Bikes
Bikes
Sales
Sales $$200,000
200,000 $$250,000
250,000
Less:
Less: variable
variable expenses
expenses 120,000
120,000 150,000
150,000
Contribution
Contribution margin
margin 80,000
80,000 100,000
100,000
Less:
Less: fixed
fixed expenses
expenses 80,000
80,000 80,000
80,000
Net
Net operating
operating income
income $$ -- $$ 20,000
20,000
Sales
Sales increased
increased by
by $20,000,
$20,000, but
but net
net operating
operating
income
income decreased
decreased byby $2,000
$2,000..
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Changes in Fixed Costs and Sales Volume
Sales
Sales increase
increase by
by $37,500,
$37,500, variable
variable costs
costs increase
increase byby
$31,125,
$31,125, but
but fixed
fixed expenses
expenses decrease
decrease by
by $6,000
$6,000..
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Break-Even Analysis
Total
Total Per
PerUnit
Unit Percent
Percent
Sales
Sales(500
(500bikes)
bikes) $$250,000
250,000 $$ 500
500 100%
100%
Less:
Less:variable
variable expenses
expenses 150,000
150,000 300
300 60%
60%
Contribution
Contributionmargin
margin $$100,000
100,000 $$ 200
200 40%
40%
Less:
Less:fixed
fixedexpenses
expenses 80,000
80,000
Net
Netoperating
operatingincome
income $$ 20,000
20,000
We calculate the break-even point as follows:
Sales = Variable expenses + Fixed expenses + Profits
Where:
Q = Number of bikes sold
$500 = Unit selling price
$300 = Unit variable expense
$80,000 = Total fixed expense
We calculate the break-even point as follows:
Sales = Variable expenses + Fixed expenses + Profits
The equation can be modified to calculate the
break-even point in sales dollars.
X = 0.60X + $80,000 + $0
Where:
X = Total sales dollars
0.60 = Variable expenses as a % of sales
$80,000 = Total fixed expenses
The equation can be modified to calculate the
break-even point in sales dollars.
X = 0.60X + $80,000 + $0
0.40X = $80,000
X = $80,000 ÷ 0.40
X = $200,000
$80,000
= $200,000 break-even sales
40%
$200Q = $180,000
Q = 900 bikes
$80,000 + $100,000
= 900 bikes
$200/bike
Break-even
Break-even
sales
sales Actual
Actual sales
sales
400
400 units
units 500
500 units
units
Sales
Sales $$ 200,000
200,000 $$ 250,000
250,000
Less:
Less: variable
variable expenses
expenses 120,000
120,000 150,000
150,000
Contribution
Contribution margin
margin 80,000
80,000 100,000
100,000
Less:
Less: fixed
fixed expenses
expenses 80,000
80,000 80,000
80,000
Net
Net operating
operating income
income $$ -- $$ 20,000
20,000
Margin of $50,000
= = 100 bikes
Safety in units $500
$100,000 = 5
$20,000
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Operating Leverage
$265,000
= 48.2% (rounded)
McGraw-Hill/Irwin $550,000 Copyright © 2006, The McGraw-Hill Companies, Inc.
Multi-product break-even analysis
Break-even Fixed expenses
sales = CM Ratio
$170,000
=
48.2%
= $352,697