Cost-Volume-Profit Analysis

SPx – VCx – FC = Operating Income

Contribution Margin Per Unit is the amount contributed from each sale toward recovering fixed costs
and then toward earning a profit. It is SPx – VCx

FC / Contribution Margin Per Unit = Break Even Point

Contribution Margin Ratio = CM/Sales

It will tell us the percentage of sales dollars that goes toward recovering fixed costs
Fixed Costs / CM Ratio = Break-Even Dollars

You may be asked to compute break-even point in units or break-even point in dollars.
You may be asked how many units or dollars to achieve a target operating income number (rather than
the breakeven $0 profit)
But, virtually all breakeven problems can be done using the two formulas:
SPx – VCx – FC = Operating Income
Fixed Costs / CM Ratio = Break-Even Dollars

Margin of Safety = Actual Sales – Breakeven Sales

Can be expressed as either units or dollars
Indicates how much sales can decrease before you have a negative income