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| Topic: |
Business
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| Number of pages / Number of words: |
6 / 1641 |
Essay's paper body
It is calculated by dividing the contribution margin in dollars by sales dollars.
For every change in sales, contribution margin will increase or decrease by the contribution margin ratio multiplied by the increase or decrease in sales dollars.
Equations
Sales ? variable costs ? fixed costs = net income
Net income = (sales price per unit x volume) ? (variable cost per unit x volume) ? fixed costs; NI = SP(x) ? VC(x) ? FC
Because SP ? VC = contribution margin (CM), the above equation can be simplified to:
NI = CM(x) ? FC
Because NI = 0 at the break even point, total CM must equal FC...
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It is calculated by dividing the contribution margin in dollars by sales dollars.
For every change in sales, contribution margin will increase or decrease by the contribution margin ratio multiplied by the increase or decrease in sales dollars.
Equations
Sales ? variable costs ? fixed costs = net income
Net income = (sales price per unit x volume) ? (variable cost per unit x volume) ? fixed costs; NI = SP(x) ? VC(x) ? FC
Because SP ? VC = contribution margin (CM), the above equation can be simplified to:
NI = CM(x) ? FC
Because NI = 0 at the break even point, total CM must equal FC...
Essay fragment
General points of the essay
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