CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-3 Decisions That Affect Net Income.

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CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-3 Decisions That Affect Net Income

CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 15-3 Contribution Margin Rate Required Contribution Margin Sales Dollars ÷= $22, ÷ = $150, or 15% Planned Net Income Total Fixed Costs Required Contribution Margin += $21, = $22,500.00$1, CALCULATING SALES TO EARN PLANNED NET INCOME page 455

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 15-3 EFFECT OF VOLUME CHANGES ON NET INCOME page 456

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 15-3 EFFECT OF COST CHANGES AT AVERAGE VOLUME page 457

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 15-3 EFFECT OF COST CHANGES AT ABOVE AVERAGE VOLUME page 458

CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON Contribution margin rate, Alternative Contribution margin rate, Alternative 2. EFFECT OF CHANGES IN COSTS ON CONTRIBUTION MARGIN RATE page

CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 15-3 New Contribution Margin per Unit Contribution Margin Unit Sales Required to Maintain Planned Net Income ÷= $22,500.00÷=45,000 units $0.50 EFFECT OF CHANGE IN SALES PRICE page 459

CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 15-3 USING BREAKEVEN TO PLAN SALES MIX page 460 Product Sales÷Net Sales=Sales Mix Television$52,500.00÷$75,000.00=70% VCR$22,500.00÷$75,000.00=30%

CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 15-3 Contribution Margin Rate Contribution MarginNet Sales ÷= USING BREAKEVEN TO PLAN SALES MIX page or 40%$30, ÷ $75, = $85,000.00$34, ÷.40 or 40% = Total Sales Dollars Required Contribution Margin Contribution Margin Rate ÷= $34,000.00$24, $10, = Required Contribution Margin Total Fixed Costs Planned Net Income +=

CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 15-3 Product Sales Dollars Sales Mix Total Sales Dollars ×= USING BREAKEVEN TO PLAN SALES MIX page 460 Product Unit Sales Product Sales Dollars Unit Sales Price ÷= Television 170 units$59, ÷ $ = 102 units$25, ÷ $ = VCR Television $59, % × $85, = $25, % × $85, = VCR

CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 15-3 TERM REVIEW sales mix page 462