Target income calculations, Cost Accounting

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

Posted Date: 7/21/2012 4:23:01 AM | Location : United States







Related Discussions:- Target income calculations, Assignment Help, Ask Question on Target income calculations, Get Answer, Expert's Help, Target income calculations Discussions

Write discussion on Target income calculations
Your posts are moderated
Related Questions
H Bhd has a 75% holding in the ordinary shares of S Sdn Bhd and 40% in A Sdn Bhd. Shares in S were acquired  in 2006 when its retained earnings were RM120 million.  The shares in A

Question: Suppose that the stock now sells at $80, and the price will go up by 5% or down by 5% at the end of first six month (t = ½).  Then, the price will either go up by 10%

From  the  following  data  write the  standard  cost  card  for  one  unit  of  the  sole  product manufactured.                                    Standard Cost card for One U

On July 1, 2008, Falk Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payments of $100,000 on each July 1


A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At tha

Important Aspect Regarding to Service Cost Centres The basis selected should be one that is judged to be the mainly equitable way of sharing the service costs of department

Balance Sheet Classi?cations and Relationships: Shelley and Co. has the following balance sheet elements as of December 31, 2012. Land. . . . . . . . . . . . . . . . . . . . . .

EARNINGS AFTER TAX-1500000 NUMBER OF EQUITY SHARE OUTSTANDING-300000 DIVIDEND PAID 600000 PRICE-EARNING RATIO-101 RATE OF RETURN ON INVESTMENT-20% WHAT IS OPTIMUM DIVIDEND PAY OUT

Q. What is the amount of compensation expense recognized for stock options for each year of the vesting period, given the following information?  A firm awards stock options at-