ACCY 207 Chapter Notes - Chapter 5: Earnings Before Interest And Taxes, Contribution Margin, Fixed Cost
Document Summary
Profit(net operating income/loss) = (sales variable expenses) fixed expenses: when a company has only a single product, further refine the equation as: Sales = selling price per unit x quantity sold = p x q. Variable expenses = variable expenses per unit x quantity sold = v x q. Profit = (p x q v x q) fixed expenses: unit cm = selling price per unit variable expenses per unit = p v. Cm ratio = (cm / sales) will be affected by a change in total sales. Cm ratio = (unit contribution margin) / (unit selling price: change in cm = cm ratio x change in sales. Variable expense ratio = (variable expenses) / sales: cm ratio = cm /sales. Cm ratio = (sales variable expenses) / sales. Cm ratio = 1 variable expense ratio: change in fixed cost and sales volume. In a single product situation: unit sales to break even = (fixed expenses)
