1. The CVP analysis developed in the previous chapter works with variable
costing but generally not with absorption costing. However, when pro-
duction equals sales, absorption costing net operating income equals
variable costing net operating income and we can use CVP analysis
without any modification.
Selling price... $120.00
Less variable cost per unit ... 87.20
Unit contribution margin ... $ 32.80
Fixed expenses+ Target net profit
Unit sales to achieve = target profit Unit contribution margin
$11,448,000+ $2,000,000
= $32.80 per unit
= 410,000 units
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