CVP Analysis - Basic Calculations Flashcards
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]
/
UCM
