ACCT 210 1st Edition Lecture 4 Outline of Last Lecture I Cost Volume Profit CVP II Breakeven III Margin of safety Outline of Current Lecture I Target income II Income after tax III Multi product CVP IV Cost plus pricing Current Lecture 1 Target income a Target income asks question How much do I have to sell to make X Total b Required sales costs Target income Contribution Margin per unit Target income Required sales Breakeven Contribution margin per unit 2 Income after tax a Part of financial statement b If Operating income 100 000 Tax rate 30 then Tax 30 000 and Income after tax 70 000 c If you want to know the operating income after being told income after tax tax rate Income after tax Operatingincome 1 tax rate 70 000 100 000 1 0 70 3 Multi product a Uses sales mix when company is selling more than product b Example Company sells jerseys and shoes c For every 4 pairs of shoes they sell they also sell one jacket d Set x of jackets sold and 4x of shoes sold e Operating income Contribution margin of jerseys of jerseys sold CM of shoes of shoes sold fixed costs or Operating income CM of jerseys x CM of shoes 4x fixed costs Solve for x 4 Cost plus pricing a Sales price product cost markup Sales price cost b Markup Cost
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