ACCTG 211 1st Edition Lecture 22 Outline of Last Lecture II Methods for Splitting mixed costs a Visual Fit Method b High low Method c Least Squares Regression Method III Contribution Margin IV CVP Analysis Outline of Current Lecture V CVP Analysis Continue a Contribution Margin Approach VI CVP With Multiple Products VII Examples a High Low Method b Single Product CVP Current Lecture I II III CVP Analysis Continued a Contribution Margin Approach i Sales Dollars Total FC Total VC Contribution Margin Ratio CVP Using multiple products a Weighted Average CM WACM i Total Units Sold per each bundle Total number of Units in each bundle b Number of All Products Units Required to Cover Fixed Costs and Desired Profit Total FC Desired Profit WACM High Low Method Example These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute IV a Provide the mixed cost equation i High Feb 1 Miles 17 700 2 Cost 5 705 ii Low Jul 1 Miles 14 100 2 Cost 4 805 iii Equation High Low High Units Low Units 1 5 705 4 805 17 700 14 100 a 25 VC Unit iv TFC TVC TC 1 Can use either the high or the low activity we will use high a 5 705 25 X 17 700 1 280 TFC Single Product CVP analysis Example a A single product firm sells its product for 80 per unit and has calculated its variable costs per unit to be 40 The firm has Total Fixed Costs of 100 000 for the period being analyzed The firm wishes to calculate the number of units it needs to sell in order to break even on the production of its product i of Units to Cover FC and Desired Profit TFC Desired Profit CM PER UNIT 1 CM Revenue VC a 80 40 40 CM per unit 2 Units to Cover FC and Desired Profit 100 000 0 40 a 2 500 Units to Break even ii Now the firm wishes to calculate the total sales dollars needed 1 Sales Dollars to Cover FC and Desired Profit TFC Desired Profit CM Ratio a CM Ratio CM per Unit Unit Sales Price i 40 80 5 2 Sales to Cover FC Desired Profit 100 000 0 5 200 000
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