1. Break-even point can be calculated using the margin formula contribution.
2. Margin contribution per unit is the selling price per unit minus the cost changed per unit. Margin contribution per unit represents excess selling price per unit.
Contribution margin(per unit) = Sale price per unit – cost changed per unit
EXAMPLE:
Sales price per unit = RM10
Cost changed per unit = RM7
Margin contribution per unit = RM10 – RM7
= RM3
3. Contribution margins help firms accommodate with fixed costs and contribute to operating income.
4. The formula for calculating the break even point through the contribution margin is as follows:
5. Contribution Margin can be disclosed as:
a) Value of money per unit
Contribution margin per unit.
= RM10- RM7
=RM3
b) Percentage (%)
c) Ratio
6. Based on the following break-even point formula:
The break-even point will change when there is a change on:
a) Fixed cost
b) Sales price per unit
c) Cost changed per unit
7. In conclusion, management can plan to achieve higher profits with:
a) Reduce fixed cost
b) Reduce cost changed per unit
c) Increase sales price per unit