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
Accounts Payable or sundry creditors are generally unsecured debts owed through the firm. These are also considered to as payables on open accounts. They may not be evidenced throu

Calculate the β of Maine Corporation from the following data. The prices are at the beginning and at the end of each year     Normal 0 false false

The total demand (marginal benefit) curve for visiting Yosemite is as follows: Price = 5000-10*NumberOfTrips -10*TonsOfVisibleTrash.     a. Suppose the quantity of trash=100 ton

can you guys do a project which is due in 2 weeks

The data set for the assignment is about breast cancer.  Some of these data have been changed for the purposes of this assignment so the results from the analysis of this file may

Questions What are your recommendations to Ted Lapres? What aspects should he keep, what should he change, and in what sequence should he make the changes? • Do you think the D

OBJECTIVES OF COST ACCOUNTING : 1-DETERMINING SELLING PRICE 2-CONTROLING COST 3- PROVIDING INFORMATION FOR DESING MAKING 4-ASCERTAINING COSTING PROFIT 5-Facilitating preparation of


Relationship among variances We cannot over emphasize the central aim of variance analysis as outlined in the above paragraphs:  that is to assign responsibility for a particu

We have earlier explained working capital by total current assets less current liabilities. It, in other words, implies that all the assets held through the business along with the