## Target income calculations, Cost Accounting

Assignment Help:

Target Income Calculations

Breaking even is not the bad thing, but surely not a satisfactory outcome for most businesses. In its place, a manager might be more interested in learning the essential sales level to achieve the aimed profit.

The idea/logic for solving this difficulty is to treat "aimed income" like an added increment of the fixed/not varying costs. Or we can say, the margin must cover the fixed costs and the desired profit:

Target Income results when the:

Sales = Total Variable Costs + Total Fixed Costs + Target Income

Suppose that Leyland wants to know the level of the sales to reach the \$600,000 income: (Units X \$2,000) = (Units X \$800) + \$1,200,000 + \$600,000

By further Solving:

Step a: (Units X \$2,000) = (Units X \$800) + \$1,200,000 + \$600,000

Step b: (Units X \$1,200) = \$1,800,000

Step c: Units = 1,500

Once more, it is possible to "jump to the step b" by splitting the fixed costs and aimed income by the per unit contribution margin:

Units to Achieve the Target Income

=

(Total Fixed Costs + Target Income) / Contribution Margin Per Unit

1,500 Units = \$1,800,000 / \$1,200

If in case you want to know the dollar level of the sales to achieve particular target net income: Sales to achieve a aimed Income

=

(Total Fixed Costs + Target Income) / Contribution Margin Ratio

\$3,000,000 = \$1,800,000 / 0.60

#### Example of abc system, Example of ABC System Assume an example, such t...

Example of ABC System Assume an example, such the cost pool for the ordering activity totaled of Ksh.100, 000 and such there were 10,000 orders the cost driver. Therefore all

#### Match the item below by entering the appropriate code letter, Match the ite...

Match the items below by entering the appropriate code letter A. Controller B. Deficit C. Payout Ratio D. Stock Dividend E. Declaration Date F. Preemptive right G. Par Value H. L

#### Evaluate the discounted mean term, Evaluate the discounted mean term (DMT) ...

Evaluate the discounted mean term (DMT) of a bond redeemable at \$120 nominal in 15 years time with annual coupons of 7% (based on a nominal bond of \$100) at interest rates of 6% ,

#### Margin of safety, Margin of safety Measures the sensitivity of budgeted...

Margin of safety Measures the sensitivity of budgeted sales volume compared with break-even sales volume. The difference between level of sales activity achieved and level of s

#### Calculate the capital account balance, You are given the following informat...

You are given the following information about a sole trader as at 1 January 2012: The value of assets and liabilities were: Non-current assets at net book value £16,800

#### Derive a truth table for a combinational logic circuit, Derive a truth tabl...

Derive a truth table for a combinational logic circuit that is to decode a 4-bit BCD representing a number in the range 0-9 and generate an appropriate 7-bit output to illuminate t

#### what are the flexible budget formula, Question: Timothy Ltd uses a fle...

Question: Timothy Ltd uses a flexible budget for overhead costs. The company expects to produce 40,000 units of the product it manufactures. Each unit requires 0.40 direct labo

#### Marginal analysis, Marginal analysis finds to equalize the cost of producin...

Marginal analysis finds to equalize the cost of producing one more item (marginal costs) with the revenue gained from selling one more item (marginal revenue).

#### Determine expected rate, Bebe, a manufacturer of sophisticated and fas...

Bebe, a manufacturer of sophisticated and fashionable women's clothing, is completing a new assembly plant in Malaysia.  A final construction payment of 6,000,000 MY

#### Direct labour rate variance, Direct Labour Rate Variance It is the dif...

Direct Labour Rate Variance It is the difference among the actual direct labour rate and the standard direct labour rate for the total hours worked. Utilizing an equation,  