Chapter 3 Cost/Volume/Profit Relationships . Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition. Cost/Volume/Profit Assumptions. - Costs can be fixed or variable - VC are directly variable - Fixed costs are stable - Sales prices are constant
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Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition
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CVP calculations can be done either on the dollar sales volume required to break even or achieve the desired profit, or on the basis of the number of units required.
Contribution margin for the overall operation is defined as the dollar amount that contributes to covering fixed costs and providing for a profit.
Total Sales - Variable Costs = Contribution Margin
To determine sales dollars to achieve the profit goal, use the following formula:
Fixed Costs + Profit
Contribution Rate = Sales Dollars to Achieve Desired Profit
FC + 0
CR = Break-even point
To determine the dollar sales required to break even, use the following formula:
Contribution Rate = Break-Even Point in Sales
Contribution Margin per Unit
= Break-Even Point in Unit Sales
© John Wiley & Sons, Inc. 2009