ECONOMICS

Detailed explanation-1: -3-5 Describe three methods that managers can use to express CVP relationships. Three methods to express CVP relationships are the equation method, the contribution margin method, and the graph method. The first two methods are most useful for analyzing operating income at a few specific levels of sales.

Detailed explanation-2: -Determine the selling price of the product You can deduct the total variable cost from the total net sale and divide this number by the number of units produced to determine the contribution margin per unit.

Detailed explanation-3: -The key CVP formula is as follows: profit = revenue – costs. Of course, to be able to apply this formula, you need to know how to work out your revenue: (retail price x number of units). Plus, you need to know how to work out your costs: fixed costs + (unit variable cost x number of units).

Detailed explanation-4: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.