CVP Analysis - Basic Calculations Flashcards Preview

CMA - Financial Decision Making > CVP Analysis - Basic Calculations > Flashcards

Flashcards in CVP Analysis - Basic Calculations Deck (3)
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1
Q

How do you calculate Target unit volume?

A

An amount of operating income, either in dollars or as a percentage of sales is frequently required. By treating target income as an additional fixed cost, CVP analysis can be applied:

Target unit volume = Fixed costs + Target operating cost / UCM

2
Q

What is the standard formula for operating income?

A

Other target income situations call for the application of the standard formula for operating income:

Operating income = Sales - Variable costs - Fixed costs

3
Q

How do you calculate Target unit volume?

A

A variation of this problem asks for net income (an after-tax amount) instead of operating income (a pretax amount)

Target unit volume = Fixed costs + [Target net income / (1.0 - tax rat0]

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UCM