Target profit is added to what other financial statement line item, or element, to determine the numerator in the overall target contribution margin (CM) calculation in break-even analysis?
A) Fixed costs
B) Variable costs
C) Operating profit
D) Net income after taxes

Question

Quizplus · Accepted Answer

Adjusting the break-even calculation to allow for a target profit simply means adding it to the numerator along with fixed costs. The addition of the target profit in the numerator represents a new, higher hurdle to surmount with the existing CM per unit or CM ratio.

Target Profit Is Added to What Other Financial Statement Line