
Concept introduction:
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. One of the helpful uses of CVP analysis is the determination of the sales required to generate a target profit (income).
Post tax earnings are a company’s pretax earnings less income tax.
Whereas pretax earnings are a company's earnings after all operating expenses have been deducted from total sales or revenues, but before income taxes have been subtracted.
Contribution margin means sales price less variable costs. Contribution represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs.
Requirement 1:
To determine:
We have to determine the amount of sales in dollars to produce target income.
Requirement 2:
To determine:
We have to determine the amount of margin of safety.

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Chapter 21 Solutions
Loose Leaf for Fundamental Accounting Principles
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