Analysis of Cost, Volume, and Pricing to Increase Profitability.ppt

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2015-09-25 发布于重庆
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Analysis of Cost, Volume, and Pricing to Increase Profitability.ppt

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Analysis of Cost, Volume, and Pricing to Increase Profitability

Analyzing Cost, Volume, and Pricing to Increase Profitability Chapter 3 Operating Leverage How a small percentage increase in sales volume can produce a significantly higher percentage increase in profitability. Determining the Contribution Margin Per Unit Determining the Contribution Margin Per Unit Determining the Contribution Margin Per Unit For each additional K6 unit Jeff sells, $200 more in contribution margin will help to cover fixed expenses and profit. Determining the Contribution Margin Per Unit Each month Jeff must generate at least $80,000 in CM to break even. Determining the Contribution Margin Per Unit If Jeff sells 400 units in a month, it will be operating at the break-even point. Determining the Contribution Margin Per Unit If Jeff sells one additional unit above the break-even point, net income increases by the amount of the contribution margin. Determining the Break-Even Point The break-even point is where total revenue is equal total costs. Determining the Break-Even Point The break-even point in units can be determined using the following equation: Determining the Break-Even Point The break-even point in units can be determined using the following equation: Estimating the Sales Volume Necessary to Attain a Target Profit Estimating the Sales Volume Necessary to Attain a Target Profit Jeff wants to know how many K6 computers must be sold to earn a profit of $100,000. Estimating the Sales Volume Necessary to Attain a Target Profit Calculate volume in units: Estimating the Sales Volume Necessary to Attain a Target Profit Here’s the proof: Estimating the Effects of Changes in Sales Price Competition is forcing Jeff to consider a drop in selling price of the K6 model. What is the impact on break-even of a drop in selling price from $500 to $460 per unit? Estimating the Effects of Changes in Sales Price The new contribution per unit would be $160 ($460 - $300). Estimating the Effects of Changes in Sales Price Here is the proof . . . Changes in Fixed