Question

• What is the format of the contribution margin version of the income statement?
• What are the three equations for calculating the break-even point?
• What are the three equations for calculating target profit?

Answer 1

1.  

Contribution Margin Income Statement
	Amounts
Sales
Less: Variable Cost
Contribution Margin
Less: Fixed Costs
Net Income Income

2. Equations to Calculate break eve pont:

First Equation

Break even point in units= Fixed Cost /Contribution Margin per unit

Second Equation

Break even point in dollars = Fixed Cost /Contribution Margin %

Third Equation : It is a method in which Net income ( profit ) is equal to zero

Sales - Variable Cost - Fixed Cost = 0

3. Equations to calculate target profit :

First equation:

Required Sales unit = (Fixed Cost + Target Profit ) / Contribution Margin per unit

Second Equation :

Required Sales in dollars = (Fixed Cost + Target Profit ) / Contribution Margin ratio

Third equation :

Net sales Revenue - Total Cost = Target Profit