【正文】 = $200 000 247。 40% = $500 000 Breakeven analysis continued 3. Graphic presentation ? An effective way to find the breakeven point is to prepare a breakeven graph ? The graph is referred to as a costvolumeprofit (CVP) graph since it shows costs, volume, and profits ? Units (sales volume) is recorded on horizontal axis ? Dollars (revenues and costs) are recorded on vertical axis PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 31 Breakeven analysis continued ? To construct a CVP graph: 1. Plot the total revenue line starting at the zero activity level 2. Plot the total fixed cost by a horizontal line 3. Plot the total cost line – this starts at the fixed cost line at zero activity 4. Determine the breakeven point from the intersection of the total cost line and the total revenue line PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 32 Breakeven Analysis continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 33 Margin of safety ? Margin of safety is the difference between expected sales and breakeven sales ? It can be expressed in dollars or as a ratio ? The adequacy of margin of safety depends on the characteristics of the business ., petitive position general economic conditions PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 34 LO7 Margin of safety continued ? Margin of safety in dollars: ? Margin of safety ratio: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Actual (expected) sales Margin of safety in dollars Margin of safety in dollars – = Actual (expected) sales Margin of safety in dollars Margin of safety ratio 247。 $200 = 1000 units Breakeven analysis continued (b) Breakeven point can be defined in terms of sales dollars by the formula: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 30 Contribution margin ratio Fixed costs Breakeven point in dollars 247。 = $250 000 247。 = $200 000 247。 $750 000 = 33% $750 000 – $500 000 = $250 000 Target profit ? Target profit is the profit objective for an individual product line ? Breakeven analysis is expanded by adding target profit to total costs ? It can be determined using – mathematical equation – contribution margin technique – graphic presentation PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 36 LO8 Target profit continued 1. Mathematical equation ? Use the basic equation with target profit added to calculate the required number of units to be sold PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 37 Required Sales Fixed costs Target profit + = Variable costs + $500Q = $300Q + $200 000 + $120 000 $200Q = $320 000 Q = 1600 units Target profit continued 2. Contribution margin technique (a) To find required sales in units: (b) To find required sales in dollars: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 38 $320 000 247。 = Contribution margin statement continued ? Contribution margin ratio is helpful in determining the effect of changes in sales on prof