Contribution margin:The difference between the sales revenue and the variable expenses is called a contribution margin.
Break-Even Point:A break-even point is the point where a company is neither making profit nor incurring any loss.
Target Profit Analysis:It is an analysis of how much unit sales or dollar sales value a company must be attain to realize the target profit estimated by the company.
1. The CM ratio and Break-even point in unit and dollar.
2. The increase in net operating income.
3. The revised net operating income (loss).
4. Required units to be sold to attain a target profit of $9,750.
5.
a) The new CM ratio and new break-even point in unit sales and dollar sales.
b) Preparation of two contribution format income statements.
c) Recommendation.
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