16 -2 
     Using Operating Income in CVP Analysis
     Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
                     Narrative Equation
                        Sales revenue
                    –  Variable expenses
                    –  Fixed expenses   
                    = Operating income
                                                           16 -3 
     Using Operating Income in CVP Analysis
     Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
            Sales (1,000 units @ $400)    $400,000
            Less:  Variable expenses          325,000
            Contribution margin           $  75,000
            Less:  Fixed expenses             45,000
               Operating income           $  30,000
                                                               16 -4 
      Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
      Using Operating Income in CVP Analysis
                      Break Even in Units
                  0 = ($400 x Units) – ($325 x Units) – $45,000
                   $400,000 ÷     $325,000 ÷ 
                      1,000          1,000
                                                                         16 -5 
      Using Operating Income in CVP Analysis
       Using Operating Income in CVP Analysis
       Using Operating Income in CVP Analysis
       Using Operating Income in CVP Analysis
                          Break Even in Units
                   0 = ($400 x Units) – ($325 x Units) – $45,000
                   0 = ($75 x Units) – $45,000
      $75 x Units = $45,000
                Units = 600                        Proof
                                                   Proof
                                   Sales (600 units)       $240,000
                                    Sales (600 units)       $240,000
                                   Less:  Variable exp.      195,000
                                    Less:  Variable exp.      195,000
                                   Contribution margin     $  45,000
                                    Contribution margin     $  45,000
                                   Less:  Fixed expenses     45,000
                                    Less:  Fixed expenses     45,000
                                       Operating income    $           0
                                        Operating income    $           0
                                                                         16 -6 
             Achieving a Targeted Profit
             Achieving a Targeted Profit
              Achieving a Targeted Profit
              Achieving a Targeted Profit
               Desired Operating Income of $60,000
        $60,000 = ($400 x Units) – ($325 x Units) – $45,000
      $105,000 = $75 x Units
             Units = 1,400
                                                  Proof
                                                  Proof
                                   Sales (1,400 units)    $560,000
                                   Sales (1,400 units)     $560,000
                                   Less:  Variable exp.     455,000
                                   Less:  Variable exp.      455,000
                                   Contribution margin    $105,000
                                   Contribution margin     $105,000
                                   Less:  Fixed expenses     45,000
                                   Less:  Fixed expenses     45,000
                                      Operating income    $  60,000
                                      Operating income     $  60,000