管理会计英文课件-

LearningObjective1Explainhowchangesinactivityaffectcontributionmarginandnetoperatingincome.LearningObjective1ExplainhoCVPAnalysisApowerfultoolformanagerstounderstandtherelationshipamongcost,volume,andprofit.Affectedbythefollowingfivefactors:1.sellingprices2.salesvolume3.unitvariablecosts4.totalfixedcosts5.mixofproductsoldCVPAnalysisApowerfultoolfoBasicsofCost-Volume-ProfitAnalysisContributionMargin(CM)istheamountremainingfromsalesrevenueaftervariableexpenseshavebeendeducted.Thecontributionincomestatementishelpfultomanagersinjudgingtheimpactonprofitsofchangesinsellingprice,cost,orvolume.Theemphasisisoncostbehavior.BasicsofCost-Volume-ProfitABasicsofCost-Volume-ProfitAnalysisCMisusedfirsttocoverfixedexpenses.AnyremainingCMcontributestonetoperatingincome.BasicsofCost-Volume-ProfitATheContributionApproachSales,variableexpenses,andcontributionmargincanalsobeexpressedonaperunitbasis.IfRacingsellsanadditionalbicycle,$200additionalCMwillbegeneratedtocoverfixedexpensesandprofit.TheContributionApproachSaleTheContributionApproachEachmonth,RBCmustgenerateatleast$80,000intotalcontributionmargintobreak-even(whichisthelevelofsalesatwhichprofitiszero).TheContributionApproachEachTheContributionApproachIfRBCsells400units

inamonth,itwillbeoperatingatthebreak-evenpoint.TheContributionApproachIfRBTheContributionApproachIfRBCsellsonemorebike(401bikes),netoperatingincomewillincreaseby$200.TheContributionApproachIfRBTheContributionApproachWedonotneedtoprepareanincomestatementtoestimateprofitsataparticularsalesvolume.Simplymultiplythenumberofunitssoldabovebreak-evenbythecontributionmarginperunit.IfRacingsells430bikes,itsnetoperatingincomewillbe$6,000.TheContributionApproachWedoCVPRelationshipsinEquationFormThecontributionformatincomestatementcanbeexpressedinthefollowingequation:Profit=(Sales–Variableexpenses)–FixedexpensesCVPRelationshipsinEquationCVPRelationshipsinEquationFormThisequationcanbeusedtoshowtheprofitRBCearnsifitsells401.Notice,theanswerof$200mirrorsourearliersolution.Profit=(Sales–Variableexpenses)–Fixedexpenses401units×$500401units×$300$80,000Profit=($200,500–Variableexpenses)–FixedProfit=($200,500–$120,300)–FixedexpensesProfit=($200,500–$120,300)–$80,000$200=($200,500–$120,300)–$80,000CVPRelationshipsinEquationCVPRelationshipsinEquationFormWhenacompanyhasonlyoneproductwecanfurtherrefinethisequationasshownonthisslide.Profit=(Sales–Variableexpenses)–FixedexpensesProfit=(P×Q–V×Q)–FixedexpensesCVPRelationshipsinEquationCVPRelationshipsinEquationFormThisequationcanalsobeusedtoshowthe$200profitRBCearnsifitsells401bikes.Profit=(Sales–Variableexpenses)–FixedexpensesProfit=(P×Q–V×Q)–FixedexpensesProfit=($500×401–$300×401)–$80,000$200=($500×401–$300×401)–$80,000CVPRelationshipsinEquationCVPRelationshipsinEquationFormUnitCM=Sellingpriceperunit–VariableexpensesperunitItisoftenusefultoexpressthesimpleprofitequationintermsoftheunitcontributionmargin(UnitCM)asfollows:Profit=(P×Q–V×Q)–FixedexpensesProfit=(P–V)×Q–FixedexpensesProfit=UnitCM×Q–FixedexpensesUnitCM=P–VCVPRelationshipsinEquationCVPRelationshipsinEquationFormProfit=(P×Q–V×Q)–FixedexpensesProfit=(P–V)×Q–FixedexpensesProfit=UnitCM×Q–FixedexpensesProfit=($500–$300)×401–$80,000Profit=$200×401–$80,000Profit=$80,200–$80,000Profit=$200ThisequationcanalsobeusedtocomputeRBC’s$200profitifitsells401bikes.CVPRelationshipsinEquationLearningObjective2Prepareandinterpretacost-volume-profit(CVP)graphandaprofitgraph.LearningObjective2PrepareanCVPRelationshipsinGraphicFormTherelationshipsamongrevenue,cost,profit,andvolumecanbeexpressedgraphicallybypreparingaCVPgraph.RacingBicycledevelopedcontributionmarginincomestatementsat0,200,400,and600unitssold.WewillusethisinformationtopreparetheCVPgraph.CVPRelationshipsinGraphicFPreparingtheCVPGraphUnitsDollarsInaCVPgraph,unitvolumeisusuallyrepresentedonthehorizontal(X)axisanddollarsonthevertical(Y)axis.

PreparingtheCVPGraphUnitsDoPreparingtheCVPGraphUnitsDollarsDrawalineparalleltothevolumeaxistorepresenttotalfixedexpenses.PreparingtheCVPGraphUnitsDoPreparingtheCVPGraphUnitsDollarsChoosesomesalesvolume,say400units,andplotthepointrepresentingtotalexpenses(fixedandvariable).Drawalinethroughthedatapointbacktowherethefixedexpenseslineintersectsthedollaraxis.PreparingtheCVPGraphUnitsDoPreparingtheCVPGraphUnitsDollarsChoosesomesalesvolume,say400units,andplotthepointrepresentingtotalsales.Drawalinethroughthedatapointbacktothepointoforigin.PreparingtheCVPGraphUnitsDoPreparingtheCVPGraphBreak-evenpoint

(400unitsor$200,000insales)UnitsDollarsLossAreaProfitAreaPreparingtheCVPGraphBreak-ePreparingtheCVPGraphProfit=UnitCM×Q–FixedCosts

AnevensimplerformoftheCVPgraphiscalledtheprofitgraph.PreparingtheCVPGraphProfitPreparingtheCVPGraphBreak-evenpoint,where

profitiszero,is400

unitssold.PreparingtheCVPGraphBreak-eLearningObjective3Usethecontributionmarginration(CMratio)tocomputechangesincontributionmarginandnetoperatingincomeresultingfromchangesinsalesvolume.LearningObjective3UsethecoContributionMarginRatio(CMRatio)$100,000÷$250,000=40%TheCMratioiscalculatedbydividingthetotalcontributionmarginbytotalsales.ContributionMarginRatio(CMContributionMarginRatio(CMRatio)ThecontributionmarginratioatRacingBicycleis:TheCMratiocanalsobecalculatedbydividingthecontributionmarginperunitbythesellingpriceperunit.CMperunitSPperunitCMRatio=

=40%$200$500=ContributionMarginRatio(CMContributionMarginRatio(CMRatio)A$50,000increaseinsalesrevenueresultsina$20,000increaseinCM($50,000×40%=$20,000).IfRacingBicycleincreasessalesfrom400to500bikes($50,000),

contributionmarginwillincreaseby$20,000($50,000×40%).

Hereistheproof:ContributionMarginRatio(CMQuickCheck

CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.WhatistheCMRatioforCoffeeKlatch?a.1.319b.0.758c.0.242d.4.139QuickCheck CoffeeKlatchi

CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.WhatistheCMRatioforCoffeeKlatch?a.1.319b.0.758c.0.242d.4.139QuickCheckUnitcontributionmarginUnitsellingpriceCMRatio==($1.49-$0.36)$1.49=$1.13$1.49=0.758 CoffeeKlatchisanespressoContributionMarginRatio(CMRatio)TherelationshipbetweenprofitandtheCMratiocanbeexpressedusingthefollowingequation:Profit=(CMratio×Sales)–FixedexpensesProfit=(40%×$250,000)–$80,000Profit=$100,000–$80,000Profit=$20,000

IfRacingBicycleincreaseditssalesvolumeto500bikes,whatwouldmanagementexpectprofitornetoperatingincometobe?ContributionMarginRatio(CMLearningObjective4Showtheeffectonnetoperatingincomeofchangesinvariablecosts,fixedcosts,sellingprice,andvolume.LearningObjective4ShowtheeTheVariableExpenseRatioThevariableexpenseratioistheratioofvariableexpensestosales.Itcanbecomputedbydividingthetotalvariableexpensesbythetotalsales,orinasingleproductanalysis,itcanbecomputedbydividingthevariableexpensesperunitbytheunitsellingprice.TheVariableExpenseRatioTheChangesinFixedCostsandSalesVolumeWhatistheprofitimpactifRacingBicyclecanincreaseunitsalesfrom500to540byincreasingthemonthlyadvertisingbudgetby$10,000?

ChangesinFixedCostsandSalChangesinFixedCostsandSalesVolume$80,000+$10,000advertising=$90,000Salesincreasedby$20,000,butnetoperatingincomedecreasedby$2,000.ChangesinFixedCostsandSalChangesinFixedCostsandSalesVolumeAshortcutsolutionusingincrementalanalysisChangesinFixedCostsandSalChangeinVariableCostsandSalesVolumeWhatistheprofitimpactifRacingBicyclecanusehigherqualityrawmaterials,thusincreasingvariablecostsperunitby$10,togenerateanincreaseinunitsalesfrom500to580?ChangeinVariableCostsandSChangeinVariableCostsandSalesVolume580units×$310variablecost/unit=$179,800Salesincreaseby$40,000andnetoperatingincomeincreasesby$10,200.ChangeinVariableCostsandSChangeinFixedCost,SalesPrice,

andVolumeWhatistheprofitimpactifRBC:(1)cutsitssellingprice$20perunit,(2)increasesitsadvertisingbudgetby$15,000permonth,and(3)increasessalesfrom500to650unitspermonth?ChangeinFixedCost,SalesPrSalesincreaseby$62,000,fixedcostsincreaseby$15,000,andnetoperatingincomeincreasesby$2,000.ChangeinFixedCost,SalesPrice,

andVolume650units×$480=$312,000Salesincreaseby$62,000,fiChangeinVariableCost,FixedCost,

andSalesVolumeWhatistheprofitimpactifRBC:(1)paysa$15salescommissionperbikesoldinsteadofpayingsalespersonsflatsalariesthatcurrentlytotal$6,000permonth,and(2)increasesunitsalesfrom500to575bikes?ChangeinVariableCost,FixedChangeinVariableCost,FixedCost,

andSalesVolumeSalesincreaseby$37,500,fixedexpensesdecreaseby$6,000,andnetoperatingincomeincreasesby$12,375.575units×$315=$181,125ChangeinVariableCost,FixedChangeinRegularSalesPriceIfRBChasanopportunitytosell150bikestoawholesalerwithoutdisturbingsalestoothercustomersorfixedexpenses,whatpricewoulditquotetothewholesalerifitwantstoincreasemonthlyprofitsby$3,000?ChangeinRegularSalesPriceIChangeinRegularSalesPriceChangeinRegularSalesPriceLearningObjective5Determinethelevelofsalesneededtoachieveadesiredtargetprofit.LearningObjective5DetermineTargetProfitAnalysisWecancomputethenumberofunitsthatmustbesoldtoattainatargetprofitusingeither:(1)Equationmethod,or(2)Formulamethod.TargetProfitAnalysisWecancEquationMethodProfit=UnitCM×Q–FixedexpensesOurgoalistosolvefortheunknown“Q”whichrepresentsthequantityofunitsthatmustbesoldtoattainthetargetprofit.EquationMethodProfit=UnitTargetProfitAnalysisSupposeRBC’smanagementwantstoknowhowmanybikesmustbesoldtoearnatargetprofitof$100,000.Profit=UnitCM×Q–Fixedexpenses$100,000=$200×Q–$80,000$200×Q=$100,000–$80,000Q=($100,000+$80,000)÷$200Q=900TargetProfitAnalysisSupposeTheFormulaMethodTheformulausesthefollowingequation.Targetprofit+Fixedexpenses

CMperunit=Unitsalestoattain

thetargetprofitTheFormulaMethodTheformulaTargetProfitAnalysisinTermsof

UnitSales

SupposeRacingBicycleCompanywantstoknowhowmanybikesmustbesoldtoearnaprofitof$100,000.Targetprofit+Fixedexpenses

CMperunit=Unitsalestoattain

thetargetprofitUnitsales=900$100,000+$80,000$200Unitsales=TargetProfitAnalysisinTermTargetProfitAnalysisWecanalsocomputethetargetprofitintermsofsalesdollarsusingeithertheequationmethodortheformulamethod.Equation

MethodFormula

MethodORTargetProfitAnalysisWecanaEquationMethodProfit=CMratio×Sales–FixedexpensesOurgoalistosolvefortheunknown“Sales,”whichrepresentsthedollaramountofsalesthatmustbesoldtoattainthetargetprofit.SupposeRBCmanagementwantstoknowthesalesvolumethatmustbegeneratedtoearnatargetprofitof$100,000.$100,000=40%×Sales–$80,00040%×Sales=$100,000+$80,000Sales=($100,000+$80,000)÷40%Sales=$450,000EquationMethodProfit=CMrFormulaMethodWecancalculatethedollarsalesneededtoattainatargetprofit(netoperatingprofit)of$100,000atRacingBicycle.Targetprofit+FixedexpensesCMratio=Dollarsalestoattain

thetargetprofitDollarsales=$450,000$100,000+$80,00040%Dollarsales=FormulaMethodWecancalculateQuickCheck CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Usetheformulamethodtodeterminehowmanycupsofcoffeewouldhavetobesoldtoattaintargetprofitsof$2,500permonth.a.3,363cupsb.2,212cupsc.1,150cupsd.4,200cupsQuickCheck CoffeeKlatchi CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Usetheformulamethodtodeterminehowmanycupsofcoffeewouldhavetobesoldtoattaintargetprofitsof$2,500permonth.a.3,363cupsb.2,212cupsc.1,150cupsd.4,200cupsQuickCheckTargetprofit+FixedexpensesUnitCMUnitsales

toattain

targetprofit=3,363cups=$3,800$1.13$2,500+$1,300$1.49-$0.36== CoffeeKlatchisanespressoQuickCheck CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Usetheformulamethodtodeterminethesalesdollarsthatmustbegeneratedtoattaintargetprofitsof$2,500permonth.a.$2,550b.$5,013c.$8,458d.$10,555QuickCheck CoffeeKlatchi CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Usetheformulamethodtodeterminethesalesdollarsthatmustbegeneratedtoattaintargetprofitsof$2,500permonth.a.$2,550b.$5,013c.$8,458d.$10,555QuickCheckTargetprofit+FixedexpensesCMratioSales$

toattain

targetprofit=$5,013=$3,8000.758$2,500+$1,300($1.49–0.36)÷$1.49== CoffeeKlatchisanespressoLearningObjective6Determinethebreak-evenpoint.LearningObjective6DetermineBreak-evenAnalysisTheequationandformulamethodscanbeusedtodeterminetheunitsalesanddollarsalesneededtoachieveatargetprofitofzero.Let’susetheRBCinformationtocompletethebreak-evenanalysis.Break-evenAnalysisTheequatioBreak-eveninUnitSales:

EquationMethod$0=$200×Q+$80,000Profits=UnitCM×Q–FixedexpensesSupposeRBCwantstoknowhowmanybikesmustbesoldtobreak-even(earnatargetprofitof$0).Profitsarezeroatthebreak-evenpoint.Break-eveninUnitSales:

EquaBreak-eveninUnitSales:

EquationMethod$0=$200×Q+$80,000

$200×Q=$80,000Q=400bikesProfits=UnitCM×Q–FixedexpensesBreak-eveninUnitSales:

EquaBreak-eveninUnitSales:

FormulaMethodLet’sapplytheformulamethodtosolveforthebreak-evenpoint.Unitsales=400$80,000$200Unitsales=Fixedexpenses

CMperunit=Unitsalesto

breakevenBreak-eveninUnitSales:

FormBreak-eveninDollarSales:

EquationMethodSupposeRacingBicyclewantstocomputethesalesdollarsrequiredtobreak-even(earnatargetprofitof$0).Let’susetheequationmethodtosolvethisproblem.Profit=CMratio×Sales–FixedexpensesSolvefortheunknown“Sales.”Break-eveninDollarSales:

EqBreak-eveninDollarSales:

EquationMethodProfit=CMratio×Sales–Fixedexpenses$0=40%×Sales–$80,00040%×Sales=$80,000Sales=$80,000÷40%Sales=$200,000Break-eveninDollarSales:

EqBreak-eveninDollarSales:

FormulaMethodNow,let’susetheformulamethodtocalculatethedollarsalesatthebreak-evenpoint.Dollarsales=$200,000$80,00040%Dollarsales=FixedexpensesCMratio=Dollarsalesto

breakevenBreak-eveninDollarSales:

FoQuickCheckCoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthebreak-evensalesdollars?a.$1,300b.$1,715c.$1,788d.$3,129QuickCheckCoffeeKlatchis CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthebreak-evensalesdollars?a.$1,300b.$1,715c.$1,788d.$3,129QuickCheckFixedexpensesCMRatioBreak-even

sales$1,3000.758=$1,715== CoffeeKlatchisanespressoQuickCheckCoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthebreak-evensalesinunits?a.872cupsb.3,611cupsc.1,200cupsd.1,150cupsQuickCheckCoffeeKlatchis CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthebreak-evensalesinunits?a.872cupsb.3,611cupsc.1,200cupsd.1,150cupsQuickCheckFixedexpensesCMperUnitBreak-even=$1,300$1.49/cup-$0.36/cup=$1,300$1.13/cup=1,150cups= CoffeeKlatchisanespressoLearningObjective7Computethemarginofsafetyandexplainitssignificance.LearningObjective7ComputethTheMarginofSafetyinDollarsThemarginofsafetyindollarsistheexcessofbudgeted(oractual)salesoverthebreak-evenvolumeofsales.Marginofsafetyindollars=Totalsales-Break-evensalesLet’slookatRacingBicycleCompanyanddeterminethemarginofsafety.TheMarginofSafetyinDollarTheMarginofSafetyinDollarsIfweassumethatRBChasactualsalesof$250,000,giventhatwehavealreadydeterminedthebreak-evensalestobe$200,000,themarginofsafetyis$50,000asshown.TheMarginofSafetyinDollarTheMarginofSafetyPercentageRBC’smarginofsafetycanbeexpressedas20%

ofsales.

($50,000÷$250,000)TheMarginofSafetyPercentagTheMarginofSafetyThemarginofsafetycanbeexpressedintermsofthenumberofunitssold.ThemarginofsafetyatRBCis$50,000,andeachbikesellsfor$500;hence,RBC’smarginofsafetyis100bikes.Marginof

Safetyinunits==100bikes$50,000

$500TheMarginofSafetyThemarginQuickCheck CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthemarginofsafetyexpressedincups?a.3,250cupsb.950cupsc.1,150cupsd.2,100cupsQuickCheck CoffeeKlatchi CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatisthemarginofsafetyexpressedincups?a.3,250cupsb.950cupsc.1,150cupsd.2,100cupsQuickCheckMarginofsafety=Totalsales–Break-evensales=950cups=2,100cups–1,150cups CoffeeKlatchisanespressoCostStructureandProfitStabilityCoststructurereferstotherelativeproportionoffixedandvariablecostsinanorganization.Managersoftenhavesomelatitudeindeterminingtheirorganization’scoststructure.CostStructureandProfitStabCostStructureandProfitStabilityThereareadvantagesanddisadvantagestohighfixedcost(orlowvariablecost)andlowfixedcost(orhighvariablecost)structures.Anadvantageofahighfixed

coststructureisthatincome

willbehigheringoodyears

comparedtocompanies

withlowerproportionof

fixedcosts.Adisadvantageofahighfixed

coststructureisthatincome

willbelowerinbadyears

comparedtocompanies

withlowerproportionof

fixedcosts.Companieswithlowfixedcoststructuresenjoygreaterstabilityinincomeacrossgoodandbadyears.CostStructureandProfitStabLearningObjective8Computethedegreeofoperatingleverageataparticularlevelofsalesandexplainhowitcanbeusedtopredictchangesinnetoperatingincome.LearningObjective8ComputethOperatingLeverage

Operatingleverageisameasureofhowsensitivenetoperatingincomeistopercentagechangesinsales.Itisameasure,atanygivenlevelofsales,ofhowapercentagechangeinsalesvolumewillaffectprofits.ContributionmarginNetoperatingincomeDegreeofoperatingleverage=OperatingLeverageOperatingOperatingLeverage$100,000$20,000=

5Degreeof

Operating

Leverage=Toillustrate,let’srevisitthecontributionincomestatementforRBC.OperatingLeverage$100,000=OperatingLeverageWithanoperatingleverageof5,ifRBCincreasesitssalesby10%,netoperatingincomewouldincreaseby50%.Here’stheverification!OperatingLeverageWithanoperOperatingLeverage10%increaseinsalesfrom$250,000to$275,000......resultsina50%increaseinincomefrom$20,000to$30,000.OperatingLeverage10%increaseQuickCheck CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatistheoperatingleverage?a.2.21b.0.45c.0.34d.2.92QuickCheck CoffeeKlatchi CoffeeKlatchisanespressostandinadowntownofficebuilding.Theaveragesellingpriceofacupofcoffeeis$1.49andtheaveragevariableexpensepercupis$0.36.Theaveragefixedexpensepermonthis$1,300.Anaverageof2,100cupsaresoldeachmonth.Whatistheoperatingleverage?a.2.21b.0.45c.0.34d.2.92QuickCheckContributionmarginNetoperatingincomeOperatingleverage=$2,373$1,073==2.21 CoffeeKlatchisanespressoQuickCheckAtCoffeeKlatchtheaveragesellingpriceofacupofcoffeeis$1.49,theaveragevariableexpensepercupis$0.36,theaveragefixedexpensepermonthis$1,300,andanaverageof2,100cupsaresoldeachmonth.Ifsalesincreaseby20%,byhowmuchshouldnetoperatingincomeincrease?a.30.0%b.20.0%c.22.1%d.44.2%QuickCheckAtCoffeeKlatchAtCoffeeKlatchtheaveragesellingpriceofacupofcoffeeis$1.49,theaveragevariableexpensepercupis$0.36,theaveragefixedexpensepermonthis$1,300,andanaverageof2,100cupsaresoldeachmonth.Ifsalesincreaseby20%,byhowmuchshouldnetoperatingincomeincrease?a.30.0%b.20.0%c.22.1%d.44.2%QuickCheckAtCoffeeKlatchtheaveragesVerifyIncreaseinProfitVerifyIncreaseinProfitStructuringSalesCommissionsCompaniesgenerallycompensatesalespeoplebypayingthemeitheracommissionbasedonsalesorasalaryplusasalescommission.Commissionsbasedonsalesdollarscanleadtolowerprofitsinacompany.

Let’slookatanexample.StructuringSalesCommissionsCStructuringSalesCommissionsPipelineUnlimitedproducestwotypesofsurfboards,theXR7andtheTurbo.TheXR7sellsfor$100andgeneratesacontributionmarginperunitof$25.TheTurbosellsfor$150andearnsacontributionmarginperunitof$18.

ThesalesforceatPipelineUnlimitediscompensatedbasedonsalescommissions.StructuringSalesCommissionsPStructuringSalesCommissionsIfyouwereonthesalesforceatPipeline,youwouldpushhardtoselltheTurboeventhoughtheXR7earnsahighercontributionmarginperunit.

Toeliminatethistypeofconflict,commissionscanbebasedoncontributionmarginratherthanonsellingpricealone.StructuringSalesCommissionsILearningObjective9Computethebreak—evenpointforamultiproductcompanyandexplaintheeffectsofshiftsinthesalesmixoncontributionmarginandthebreak-evenpoint.LearningObjective9ComputethTheConceptofSalesMixSalesmixistherelativeproportioninwhichacompany’sproductsaresold.Differentproductshavedifferentsellingprices,coststructures,andcontributionmargins.Whenacompanysellsmorethanoneproduct,break-evenanalysisbecomesmorecomplexasthefollowingexampleillustrates.

Let’sassumeRacingBicycleCompanysellsbikesandcartsandthatthesalesmixbetweenthetwoproductsremainsthesame.TheConceptofSalesMixSalesMulti-ProductBreak-EvenAnalysisBikescomprise45%ofRBC’stotalsalesrevenueandthecartscomprisetheremaining55%.RBCprovidesthefollowinginformation:$265,000$550,000=48.2%(rounded)Multi-ProductBreak-EvenAnalyMulti-ProductBreak-EvenAnalysisFixedexpensesCMratio=Dollarsalesto

breakevenDollarsalesto

breakeven$170,000

48.2%==$352,697Multi-ProductBreak-EvenAnalyKeyAssumptionsofCVPAnalysisSellingpriceisconstant.Costsarelinearandcanbeaccuratelydividedintovariable(constantperunit)andfixed(constantintotal)elements.Inmultiproductcompanies,thesalesmixisconstant.Inmanufacturingcompanies,inventoriesdonotchange(unitsproduced=unitssold).KeyAssumptionsofCVPAnalysiLearningObj