Page 111 - MAC4861_2 Costing Class Slides Part 1
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TEST 3 - COSTING
Overview
Application of CVP
• Please note that ALL variable costs and ALL fixed costs (production
AND non-production costs) are included in the break-even calculation.
• Contribution per unit equals the sales price per unit less ALL variable
costs per unit. The contribution margin ratio is the contribution
expressed as a percentage of sales.
• The net profit figure in a break-even calculation is ALWAYS BEFORE
TAX. Therefore if you are told in a question that you are trying to
achieve a net profit AFTER tax of, for example R50 000, you must first
convert the R50 000 to a BEFORE tax amount before you use it in the
break-even calculation.
• Remember that a break-even point (in units) should always be
ROUNDED UP as one less unit sold will lead to a small loss.
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