might use CVP in decision making. In your discussion, make sure you provide examples relating to Walker Books.

Figure 1

Formulas

Picture

Photo

B+W

Non-Fiction

Fiction

Unit Contribution Margin
([Total revenue-Total variable cost]/Number of units)

2.26

2.21

1.76

2.41

2.37

Profit
([Unit Contribution Margin*No of units] – total fixed cost)

-$26,642

-$23,586

-$24,441

-$13,619

-$3,738

Net Profit Margin
(Net Profit/Sales)

-7%

-11%

-18%

-7%

-6%

These figures calculated are taken from the year 2012 to help aid our decision making for the year
2013.

Unit Contribution Margin (UCM) refers to the profit earned per unit without taking fixed costs into consideration. The figures shown in Figure 1 show that Picture, Non-Fiction and Fiction segments are doing better as their UCM are at a higher range as compared to Photo and B+W segments.

Profit refers to the final income of the Company after taking fixed costs into account. By determiningprofit or loss, it will allow us to decide whether to drop or continue the book line. The figures shown above show that Picture, Photo and B+W segments are making higher losses as compared to Non-Fiction and Fiction segments. The UCM for the respective segments are relatively low (e.g. earning $1.67 per unit excluding fixed costs). Hence, the Company ended up making losses after taking fixed costs into consideration. Since the Company has incurred losses, it shows that the Company is selling below the breakeven point.

Net Profit Margin (NPM) refers to the profit generated after considering all the expenses and revenues. By looking at the percentages in Figure 1, Photo and B+W segments are making higher losses as compared to Picture, Non-Fiction and Fiction segments.

Hence,