1995 Volume 3 Issue 2 Pages 27-42
Traditional breakeven analysis has been expanded into many variations, such as multiproduct CVP analysis, CVP analysis under uncertainty. Breakeven analysis under absorption costing is also the variation of it, which is useful when we can not assume an identity of sales and production amounts. But, this analysis gives management no information about corporate income taxes. It is necessary to provide tax-related information for management.
To provide useful information for short-term profit planning, this study will:
(1) derive the taxes functions of sales and production amounts based on the accrual basis and introduce these functions to breakeven analysis under absorption costing;
(2) derive the breakeven function and some target functions, such as the target profit function, the target margin of safety ratio function, and the target return on sales function, of sales and production amounts; and
(3) demonstrates above target functions with some constraints, such as the sales constraint and the production contraint, to show attainable and feasible region.
