Accounting Business Reporting for Decision Making

426 Accounting: Business Reporting for Decision Making

(continued)

$

Prot

Lo ss

Total xed

costs

Break-even point

Activity level

Total costs

Total revenue

Total variable costs

FIGURE 10.4 A graphical representation of CVP

Figure 10.5 below shows the CVP graph for ATC at break-even number of players.

Break-even = 30 players

Sales@$150 per player

V.C.@$90 per player

$

Volume

$1800 xed

FIGURE 10.5 Graphical presentation — ATC break even

Clearly, as soon as ATC increases the number of players above 30, it begins to make a profit. It is

possible to build a desired profit level into the above analysis and thereby calculate the units (or players)

required to be sold to achieve a particular profit. The formula for this calculation is:

Fixed cost + desired profit ($)

= x sales units to earn a desired profit

Contribution margin per unit ($)