500,000 Units Traditional Income Statement 1 Look at the Income Statement to the right Revenue is 500,000 units sold for $2,500,000 Look at this income statement - they lost $100,000 Revenue Cost of Goods Sold Gross Profit Selling Expense Admin Expense $ 2,500,000.00 $ 2,140,000.00 $ 360,000.00 $ 250,000.00 $ 210,000.00 $ (100,000.00) How many more would they have had to sell to break even (0 profit)? Net Loss 2 Put the given revenue and costs into a CVP income statement for Tanek Company. The problem gives the variable and fixed amounts for each type of expense Create CVP Income Statement Below Revenue Variable Cost Contribution Margin Fixed Cost Net Income 500,000 Units $2,500,000 Sales $2,600,00 expenses $100,00 Net Loss Cost of goods sold Selling expenses Administrative expenses Total Variable $2,140,000 $1,590,000 250,000 92,000 210,000 68,000 $2,600,000 $1,750,000 Fixed $550,000 158,000 142,000 $850,000 3 Use the following formulas to find the Break even points Break even in Units - Fixed Costs / Unit Contribution Margin Break even in $$ = Fixed Costs / Contribution Margin % NOTE: The break even in units will not be a whole number you will have to round. Answers: Break even in Units Break even in $$$ How Much? 4 Raise the selling price by 20% Do they make a profit? Leave units and costs the same 5 Company sells 2 products Products % of Business Contribution Margin Tablets MP3 Players 0.6 0.4 0.3 0.35 Fixed Cost $ 120,000 Break Even in $$$$$ b How much Tablets How Much MP-3 Players