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A target operating income contribution computation allows the manager to determine how many procedures must be performed in order to yield a particular operating income.
| A target operating income contribution computation allows the manager | |||||||||||||||
| to determine how many procedures must be performed in order to yield a | |||||||||||||||
| particular operating income. | |||||||||||||||
| The formula is compute this is: | |||||||||||||||
| N = | Fixed Costs + Target Operating Income | ||||||||||||||
| Contribution Margin Per Unit | |||||||||||||||
| Assumptions: | |||||||||||||||
| A. | Desired (target) operating income = | $ 3,800 | |||||||||||||
| B. | Revenue per Procedure | = | $ 150 | ||||||||||||
| C. | Variable Cost Per Unit | = | $ 75 | ||||||||||||
| D. | Total Fixed Cost | = | $ 3,000 | ||||||||||||
| Calculate the Number of Units/Procedures Needed to Reach the | |||||||||||||||
| Target Operating Income | |||||||||||||||
| Fixed Costs | Fixed Costs | Targ Op Inc | |||||||||||||
| Target Operating Income | 3,000 | 3,800 | 6,800 | ||||||||||||
| - | |||||||||||||||
| - | - | - | |||||||||||||
| - | |||||||||||||||
| - | |||||||||||||||
| Units | #DIV/0! | ||||||||||||||
| PROOF | |||||||||||||||
| 150 | #DIV/0! | #DIV/0! | |||||||||||||
| 75 | #DIV/0! | #DIV/0! | |||||||||||||
| Contribution Margin | 75 | ||||||||||||||
| Fixed Cost | 3,000 | ||||||||||||||
| Target Operating Income | 3,800 | ||||||||||||||
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Knowledge Management In Organizations A Critical Introduction
Authors: Donald Hislop
3rd Edition
0199691932, 9780199691937
