Chapter 08. Markups and Markdowns: Perishables and Breakeven Analysis. Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Chapter 08. Markups and Markdowns: Perishables and Breakeven Analysis. Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved."

Transcription

1 Chapter 08 Markups and Markdowns: Perishables and Breakeven Analysis McGraw-Hill/Irwin Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

2 #8 LU8.1 Markups and Markdowns; Perishables and Breakeven Analysis Learning Unit Objectives Markup Based on Cost (100%) 1. Calculate dollar markup and percent markup on cost 2. Calculate selling price when you know cost and percent markup on cost 3. Calculate cost when dollar markup at percent markup on cost are known Calculate cost when you know the selling price and percent markup on cost

3 #8 Markups and Markdowns; Perishables and Breakeven Analysis LU Learning Unit Objectives Markup Based on Selling Price (100%) 1. Calculate dollar markup and percent markup on selling price 2. Calculate selling price when dollar markup and percent markup on selling price are known 3. Calculate selling price when cost and percent markup on selling price are known 4. Calculate cost when selling price and percent markup on selling price are known 5. Convert from percent markup on cost to percent markup on selling price and vice versa

4 #8 Markups and Markdowns; Perishables and Breakeven Analysis LU8.3 Learning Unit Objectives Markdowns and Perishables 1. Calculate markdowns; compare markdowns and markups 2. Price perishable items to cover spoilage loss 8-4

5 #8 Markups and Markdowns; Perishables and Breakeven Analysis LU8.4 Learning Unit Objectives Breakeven Analysis 1. Calculating Contribution Margin (CM) 2. Calculating a Breakeven Point (BE) 8-5

6 Terminology Cost - The price retailers pay to a manufacturer or supplier Selling Price - The price retailers charge customers Markup, margin, or gross profit - The difference between the cost of bringing the goods into the store and the selling price Operating expenses or overhead - The regular expenses of doing business such as rent, wages, utilities, etc. Net profit or net income - The profit remaining after subtracting the cost of bringing the goods into the store and the operating expenses 8-6

7 Basic Selling Price Formula Selling price (S) = Cost (C) + Markup (M) $23 Jean $18 - Price paid to bring Jeans into store $5 - Dollars to cover operating expenses and make a profit 8-7

8 Markups Based on Cost (100%) Dollar markup is the portion Cost + Markup = Selling Price 100% 27.78% % Cost is 100% - the Base Percent markup on cost is the rate 8-8

9 Calculating Dollar Markup and Percent Markup on Cost Dollar Markup = Selling Price - Cost $ 5 = $23 - $18 Gap buys fleece jackets for $18. They plans to sell them for $23. What is Gap s markup? What is the percent markup on cost? Percent Markup on Cost = Dollar Markup Cost $5 = 27.78% $18 Check: Selling Price = Cost + Markup 23 = (18) $23 = $18 + $5 8-9 Cost (B) = Dollar Markup Percent markup on cost $5 = $

10 Calculating Selling Price When You Know Cost and Percent Markup on Cost Mel s Furniture bought a lamp for $100. To make Mel s desired profit, he needs a 65% markup on cost. What is Mel s dollar markup? What is his selling price? S = C + M S = $ ($100) S = $100 + $65 S = $165 Dollar Markup 8-10

11 Calculating Cost When You Know Selling Price and Percent Markup on Cost Jill Sport, owner of Sports, Inc., sells tennis rackets for $50. To make her desired profit, Jill needs a 40% markup on cost. What do the tennis rackets cost Jill? What is the dollar markup? S = C + M $50 = C +.40(C) $50 = 1.40C $35.71 = C M = S - C M = $50 - $35.71 M = $

12 Markups Based on Selling Price (100%) Cost + Markup = Selling Price Dollar ($) markup is the portion (P) 78.26% % = 100% Percent (%) markup on selling price is the rate (R) Selling Price is 100% - the Base (B) 8-12

13 Calculating Dollar Markup and Percent Markup on Selling Price Dollar Markup = Selling Price - Cost $ 5 = $23 - $18 Percent Markup on Selling Price = Dollar Markup Selling Price $5 = 21.74% $23 The cost to Gap for a hooded fleece jacket is for $18; the store then plans to sell them for $23. What is Gap s dollar markup? What is its percent markup on selling price? 8-13 Check: Selling Price = Cost + Markup 23 = ($23) $23 = $18 + $5 Selling Price = Dollar Markup Percent markup on SP $5 = $

14 Calculating Selling Price When You Know Cost and Percent Markup on Selling Price Mel s Furniture bought a lamp for $100. To make desired profit, he needs a 65% markup on selling price. What are Mel s selling price and dollar markup? 8-14 M = S - C M = $ $100 M = $ S = C + M S = $ (S) -.65s -.65S.35s = $ S = $285.71

15 Calculating Cost When You Know Selling Price and Percent Markup on Selling Price S = C + M $50 = C +.40($50) $50 = C + $ $20 $30 = C Jill Sport, owner of Sports, Inc., sells tennis rackets for $50. To make her desired profit, Jill needs a 40% markup on selling price. What is the dollar markup? What do the tennis rackets cost Jill? Dollar Markup 8-15

16 Conversion Formula for Converting Percent Markup on Cost to Percent Markup on Selling Price Percent markup on cost 1+ Percent markup on cost.2778 = 21.74% Formula for Converting Percent Markup on Selling Price to Percent Markup on Cost Percent markup on selling price 1- Percent markup on selling price.2174 = 27.78%

17 Equivalent Markup Percent markup on Selling Price Percent markup on cost (round to nearest tenth percent)

18 Markdowns Markdown percent = Dollar markdown Selling price (original) $10.80 Sears marked down a $18 tool set to $ What are the dollar markdown and the markdown percent? $7.20 $ % $18-$10.80 Markdown 8-18

19 Pricing Perishable Items TC = 300lb. X $.14 = $42.00 TS = TC + TM TS = $ ($42) TS = $ lbs. X.05 = 15lbs $67.20 = $ lbs. 300lbs. - 15lbs Selling Price per pound Alvin s vegetable stand grew 300 pounds of tomatoes. He expects 5% of the tomatoes to become spoiled and not salable. The tomatoes cost Alvin $.14 per pound and he wants a 60% markup on cost. What price per pound should Alvin charge for the tomatoes? 8-19

20 Break Even Analysis - Terminology Fixed Cost (FC) Costs that do not change with increases or decreases in sales Variable costs (VC) Costs that do change in response to changes in the sales Contribution Margin (CM) The difference between selling price (S) and variable costs (VC). Breakeven Point (BE) The point at which the seller has covered all costs of a unit and has not made any profit or suffered any loss. Selling Price (S) Price of goods 8-20

21 Calculating a Contribution Margin (CM) Contribution margin (CM) = Selling Price (S) Variable cost (VC) Assume Jones Company produces pens that have a selling price (S) of $2 and a variable cost (VC) of $.80. Calculate the contribution margin CM = $2,00 (S) - $.80 (VC) CM = $

22 Calculating a Breakeven Point (BE) Breakeven point (BE) = Fixed Costs (FC) Contribution margin (CM) Jones Company produces pens. The company has fixed cost (FC) of $60,000. Each pen sells for $2.00 with a variable cost (VC) of $.80 per pen. Breakeven point (BE) = $60,000 (FC) = 50,000 $2.00 (S) - $.80 (VC) 8-22

23 Problem 8-19: Solution: $3,000 Dollar markup = S C Percent markup on cost = $12,000 = 25% $3,000 = $15,000 - $12,000 Check: C = Dollar markup. = $3,000 = $12,000 Percent markup on cost

24 Problem 8-21: Solution: $20 = C +.40C $20 = 1.40C $14.29 = C Check: Cost = Selling price _ 1 + Percent markup on cost 8-24 $14.29 = $

25 Problem 8-24: Solution: Markup = $ $.42 = $1.08 $1.08/.42 = = % Check: $1.50 = $ (.42) $1.50 = $ $1.50 = $

26 Problem 8-25: Solution: $120 = C +.30($120) $120 = C + $ $84 = C Check: C = Selling price x (1- Percent markup on selling price) $84 = $120 x

27 Problem 8-29: Solution: Total cost = 100 x $2.00 = $200 Total selling price = TC + TM TS = $ ($200) TS = $200 + $120 TS = $320 Selling price per cookie = $320 = $ cookies (100 cookies 10%) 8-27

Mathematics of Merchandising

Mathematics of Merchandising 4-2 Mathematics of Merchandising Chapter 4 4-3 Learning Objectives After completing this chapter, you will be able to: > Calculate the net price of an item after single or multiple trade discounts > Calculate

More information

Applications of Linear Equations. Chapter 5

Applications of Linear Equations. Chapter 5 5-2 Applications of Linear Equations Chapter 5 5-3 After completing this chapter, you will be able to: > Solve two linear equations in two variables > Solve problems that require setting up two linear

More information

Break-even analysis. On page 256 of It s the Business textbook, the authors refer to an alternative approach to drawing a break-even chart.

Break-even analysis. On page 256 of It s the Business textbook, the authors refer to an alternative approach to drawing a break-even chart. Break-even analysis On page 256 of It s the Business textbook, the authors refer to an alternative approach to drawing a break-even chart. In order to survive businesses must at least break even, which

More information

Chapter 27 Pricing Math. Section 27.1 Calculating Prices Section 27.2 Calculating Discounts

Chapter 27 Pricing Math. Section 27.1 Calculating Prices Section 27.2 Calculating Discounts Chapter 27 Pricing Math Section 27.1 Calculating Prices Section 27.2 Calculating Discounts Calculating Prices Key Terms gross profit maintained markup Objectives Explain how a firm s profit is related

More information

Quantitative Marketing Analysis

Quantitative Marketing Analysis Quantitative Marketing Analysis CLASS 2 09.16.13 Revenue (sales) Income Statement Sections 5 Expenses Cost of goods sold (FC and VC) Operating expenses (generally FC) Profit 1 EXHIBIT 2.4: PRO FORMA INCOME

More information

Grade 11 or 12 Mathematics for Business

Grade 11 or 12 Mathematics for Business Grade 11 or 12 Mathematics for Business Strands 1. Basic Mathematics 2. Basic Business Applications 3. Mathematics of Retailing 4. Mathematics of Finance 5. Accounting and Other Applications Strand 1:

More information

Quiz Chapter 7 - Solution

Quiz Chapter 7 - Solution Quiz Chapter 7 - Solution 1. In an income statement prepared as an internal report using the variable costing method, variable selling and administrative expenses would: A) not be used. B) be treated the

More information

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis HOSP 2110 (Management Acct) Learning Centre Cost-Volume-Profit Analysis The basic principles of CVP analysis were covered in business math. CVP analysis can be done both graphically, through plotting the

More information

Place in College Curriculum: This course is required for all Business Administration AAS degree and Administrative Assistant certificate.

Place in College Curriculum: This course is required for all Business Administration AAS degree and Administrative Assistant certificate. Salem Community College Course Syllabus Section I Course Title: Business Mathematics Course Code: BUS106 Lecture Hours: 3 Lab Hours: 0 Credits: 3 Course Description: The Business Mathematics course is

More information

RETAIL INVENTORY METHOD

RETAIL INVENTORY METHOD APPENDIX D RETAIL INVENTORY METHOD OBJECTIVE 1 Determine ending inventory by applying the retail inventory method. Accounting for inventory in a retail operation presents several challenges. ers with certain

More information

Merchandise Accounts. Chapter 7 - Unit 14

Merchandise Accounts. Chapter 7 - Unit 14 Merchandise Accounts Chapter 7 - Unit 14 Merchandising... Merchandising... There are many types of companies out there Merchandising... There are many types of companies out there Service company - sells

More information

Chapter 6: Break-Even & CVP Analysis

Chapter 6: Break-Even & CVP Analysis HOSP 1107 (Business Math) Learning Centre Chapter 6: Break-Even & CVP Analysis One of the main concerns in running a business is achieving a desired level of profitability. Cost-volume profit analysis

More information

Business Plan Workbook

Business Plan Workbook Business Plan Workbook TABLE OF CONTENTS 1.0 OVERVIEW... 3 2.0 DESCRIPTION OF THE BUSINESS... 5 3.0 OWNERSHIP & MANAGEMENT... 7 4.0 MARKET & INDUSTRY OVERVIEW... 8 5.0 MARKETING PLAN & STRATEGY... 11 6.0

More information

1. Austin Manufacturing had the following operating data for the year just ended.

1. Austin Manufacturing had the following operating data for the year just ended. 1. Austin Manufacturing had the following operating data for the year just ended. Selling price per unit $60 per unit Variable expense per unit $22 per unit Fixed expense $504,000 Management plans to improve

More information

C 6 - ACRONYMS notesc6.doc Instructor s Supplemental Information Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM

C 6 - ACRONYMS notesc6.doc Instructor s Supplemental Information Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM C 6 - ACRONYMS notesc6.doc Instructor s Supplemental Information ACRONYMS (ABBREVIATIONS) FOR USE WITH MANAGERIAL ACCOUNTING RELATING TO COST-VOLUME-PROFIT ANALYSIS. CM Contribution Margin in total dollars

More information

Chapter 9 Test. Date. Name. Multiple Choice Identify the choice that best completes the statement or answers the question.

Chapter 9 Test. Date. Name. Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 9 Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Which organization is responsible for regulating the calculation of depreciation? a. CIA

More information

Merchandising Chain Chapter 5 Trade Discount, Cash Discount, Markup, and Markdown Terminology Used in the Trade Discounts (5.1) Merchandising Chain

Merchandising Chain Chapter 5 Trade Discount, Cash Discount, Markup, and Markdown Terminology Used in the Trade Discounts (5.1) Merchandising Chain Chapter 5 Trade Discount, Cash Discount, Markup, and Markdown Merchandising Chain As a product is purchased and sold along a chain, each merchandiser adds a markup above the cost of buying to the merchandise.

More information

Tech Prep In Business & Office Technology

Tech Prep In Business & Office Technology Tech Prep In Business & Office Technology A consortium of High School, Community College and University Departments This document contains student competency requirements for the specialized area of: BUSINESS

More information

Variable Costs. Breakeven Analysis. Examples of Variable Costs. Variable Costs. Mixed

Variable Costs. Breakeven Analysis. Examples of Variable Costs. Variable Costs. Mixed Breakeven Analysis Variable Vary directly in proportion to activity: Example: if sales increase by 5%, then the Variable will increase by 5% Remain the same, regardless of the activity level Mixed Combines

More information

Money Math for Teens. Break-Even Point

Money Math for Teens. Break-Even Point Money Math for Teens Break-Even Point This Money Math for Teens lesson is part of a series created by Generation Money, a multimedia financial literacy initiative of the FINRA Investor Education Foundation,

More information

Matt 109 Business Mathematics Notes. Spring 2013

Matt 109 Business Mathematics Notes. Spring 2013 1 To be used with: Title: Business Math (Without MyMathLab) Edition: 8 th Author: Cleaves and Hobbs Publisher: Pearson/Prentice Hall Copyright: 2009 ISBN #: 978-0-13-513687-4 Matt 109 Business Mathematics

More information

Tech Prep In Business & Office Technology

Tech Prep In Business & Office Technology Tech Prep In Business & Office Technology A consortium of High School, Community College and University Departments This document contains student competency requirements for the specialized area of: BUSINESS

More information

Trade Discount, Cash Discount, Markup, and Markdown. Yann Lamontagne

Trade Discount, Cash Discount, Markup, and Markdown. Yann Lamontagne Trade Discount, Cash Discount, Markup, and Markdown Yann Lamontagne Winter 2008 Trade Discount: Merchandising Chain Manufacturer Wholesaler Retailer Consumer The manufacturer gives a list price or MSRP

More information

THEME: INVENTORY ESTIMATION TECHNIQUES

THEME: INVENTORY ESTIMATION TECHNIQUES THEME: INVENTORY ESTIMATION TECHNIQUES By John W. Day, MBA ACCOUNTING TERMS: Retail Method Terminology Original Sales Price The retail price at which goods are originally offered for sale. Markup The difference

More information

Management Accounting Fundamentals

Management Accounting Fundamentals Management Accounting Fundamentals Module 4 Cost behaviour and cost-volume-profit analysis Lectures and handouts by: Shirley Mauger, HB Comm, CGA Part 1 2 3 Module 4 - Table of Contents Content 4.1 Variable

More information

volume-profit relationships

volume-profit relationships Slide 1.3.1 1. Accounting for decision making 1.3 Cost-volume volume-profit relationships Slide 1.3.2 Introduction This chapter examines one of the most basic planning tools available to managers: cost

More information

The variable cost for each component are $ 2,000 The components are sold for $ The company sold during the prior year Ignore income taxes

The variable cost for each component are $ 2,000 The components are sold for $ The company sold during the prior year Ignore income taxes Hilton Ex 8-26, 320-321 Air safety systems manufactures component used in radar safety systems The firms fixed costs are $ 4,000,000 per year The variable cost for each component are $ 2,000 The components

More information

ACCOUNTING FOR MERCHANDISING OPERATIONS

ACCOUNTING FOR MERCHANDISING OPERATIONS Chapter 5 ACCOUNTING FOR MERCHANDISING OPERATIONS PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Winston

More information

Back-of-the-Envelope Breakeven Analysis

Back-of-the-Envelope Breakeven Analysis Back-of-the-Envelope Breakeven Analysis Finding your breakeven point the sales point where you cover all your expenses can be one of the most helpful exercises you can do for business success. Knowing

More information

Computing the Markup

Computing the Markup 16-1 Computing the Markup To make a profit, you need to sell a product at a higher rate than its cost, or the amount you purchased it for. Cost includes expenses such as freight charges. Your markup, or

More information

MANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse

MANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse MANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse Learning Objective 1 CHAPTER 3 Cost Volume Profit Analysis and Planning Identify the uses and limitations of traditional cost volume profit analysis.

More information

Appendix. PERCENT AND THEIR APPLICATIONS. 1. Percent formulas

Appendix. PERCENT AND THEIR APPLICATIONS. 1. Percent formulas Appendix. PERCENT AND THEIR APPLICATIONS The answers to the tasks and examples will often be inaccurate numbers; however, when typing answers we will usually use the equality sign at the accuracy of an

More information

Break-even Analysis Chapter 13

Break-even Analysis Chapter 13 Break-even Analysis Chapter 13 Unit 3 Performance Objectives: You will work together to solve several sample break-even problems and then calculate your own break-even analysis in Microsoft Excel. Evaluation

More information

Chapter. Project Analysis and Evaluation. McGraw-Hill/Irwin. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter. Project Analysis and Evaluation. McGraw-Hill/Irwin. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 11 Project Analysis and Evaluation McGraw-Hill/Irwin Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Key Concepts and Skills Understand forecasting risk and sources of value

More information

What is a business plan?

What is a business plan? What is a business plan? A business plan is the presentation of an idea for a new business. When a person (or group) is planning to open a business, there is a great deal of research that must be done

More information

CHAPTER 6. Accounting for retailing CONTENTS

CHAPTER 6. Accounting for retailing CONTENTS CHAPTER 6 Accounting for retailing CONTENTS 6.1 Journal entries periodic inventory system 6.2 Journal entries involving discounts, closing entries and statements of financial performance both perpetual

More information

The Basic Framework of Budgeting

The Basic Framework of Budgeting Master Budgeting 1 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 1. The act of

More information

How to Analyze Profitability

How to Analyze Profitability How to Analyze Profitability Peoples Bank Business Resource Center Business Builder 7 peoplesbancorp.com 800.374.6123 Table of Contents What to Expect... 4 What You Should Know Before Getting Started...

More information

Chapter 22: Cost-Volume-Profit

Chapter 22: Cost-Volume-Profit Chapter 22: Cost-Volume-Profit DO IT! 1 Types of Costs Helena Company reports the following total costs at two levels of production. 10,000 Units 20,000 Units Direct materials $20,000 $40,000 Maintenance

More information

Quiz - Chapter 9 - Solutions

Quiz - Chapter 9 - Solutions Quiz - Chapter 9 - Solutions 1. Royco, Inc. contracted, for the current year, to purchase $425,000 worth of light fixtures from a retailer for $5 per unit. Royco keeps 12 1/2 percent of its annual purchases

More information

Financial Statement in Small Business. 103 MGT Entrepreneurship. Income Statement

Financial Statement in Small Business. 103 MGT Entrepreneurship. Income Statement Financial Statement in Small Business 103 MGT Entrepreneurship 1 st semester 1433-1434 Entrepreneur should use three financial statements: 1. 2. Cash Flow Statement 3. Balance Statement Monthly statement

More information

Math. Rounding Decimals. Answers. 1) Round to the nearest tenth. 8.54 8.5. 2) Round to the nearest whole number. 99.59 100

Math. Rounding Decimals. Answers. 1) Round to the nearest tenth. 8.54 8.5. 2) Round to the nearest whole number. 99.59 100 1) Round to the nearest tenth. 8.54 8.5 2) Round to the nearest whole number. 99.59 100 3) Round to the nearest tenth. 310.286 310.3 4) Round to the nearest whole number. 6.4 6 5) Round to the nearest

More information

ACG 3024 Accounting for Non-Financial Majors Homework Portfolio Study Guide

ACG 3024 Accounting for Non-Financial Majors Homework Portfolio Study Guide ACG 3024 Accounting for Non-Financial Majors Homework Portfolio Study Guide These are similar questions with the answers to help guide you when preparing the Homework Portfolio that you will upload to

More information

ABOUT FINANCIAL RATIO ANALYSIS

ABOUT FINANCIAL RATIO ANALYSIS ABOUT FINANCIAL RATIO ANALYSIS Over the years, a great many financial analysis techniques have developed. They illustrate the relationship between values drawn from the balance sheet and income statement

More information

averages simple arithmetic average (arithmetic mean) 28 29 weighted average (weighted arithmetic mean) 32 33

averages simple arithmetic average (arithmetic mean) 28 29 weighted average (weighted arithmetic mean) 32 33 537 A accumulated value 298 future value of a constant-growth annuity future value of a deferred annuity 409 future value of a general annuity due 371 future value of an ordinary general annuity 360 future

More information

FINANCIAL INTRODUCTION

FINANCIAL INTRODUCTION FINANCIAL INTRODUCTION In earlier sections you calculated your cost of goods sold, overhead expenses and capital cost in order to help you determine the sales price of your product. In your business plan,

More information

COST-VOLUME-PROFIT RELATIONSHIPS

COST-VOLUME-PROFIT RELATIONSHIPS TM 5-1 COST-VOLUME-PROFIT RELATIONSHIPS Cost-volume-profit (CVP) analysis is concerned with the effects on net operating income of: Selling prices. Sales volume. Unit variable costs. Total fixed costs.

More information

Accounting 2910, Summer 2002 Practice Exam 4. 1. The cost of materials entering directly into the manufacturing process is classified as:

Accounting 2910, Summer 2002 Practice Exam 4. 1. The cost of materials entering directly into the manufacturing process is classified as: Accounting 2910, Summer 2002 Practice Exam 4 1. The cost of materials entering directly into the manufacturing process is classified as: a. direct labor cost b. factory overhead cost c. burden cost d.

More information

CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT ANALYSIS

CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT ANALYSIS CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT ANALYSIS 11. a. Break-even in units = $90,000 ($70 $40) = 3,000 units b. In dollars break-even = 3,000 $70 = $210,000 12. a. Break-even point in rings

More information

The Role of the Basic Profit Equation in Selecting a Selling Price Ted Mitchell

The Role of the Basic Profit Equation in Selecting a Selling Price Ted Mitchell The Role of the Basic Profit Equation in Selecting a Selling Price Ted Mitchell Consider the following three exam questions: #1 A person bought a wagon at $4 and sold it at a price that provides the desired

More information

UNIT2:- Session 1-3 :- Cost analysis for planning and decision making :-

UNIT2:- Session 1-3 :- Cost analysis for planning and decision making :- UNIT2:- Session 1-3 :- Cost analysis for planning and decision making :- * Cost classification and approach :- A- Marginal costing :- - variable and fixed. - Variable cost is charged to the product unit.

More information

RENAISSANCE ENTREPRENEURSHIP CENTER First Finance Class (FIN-1)

RENAISSANCE ENTREPRENEURSHIP CENTER First Finance Class (FIN-1) Finance 1 (FIN-1) RENAISSANCE ENTREPRENEURSHIP CENTER (FIN-1) Learning Outcomes At the conclusion of this class, you should: Know what will be covered in the six finance class sessions. Have reviewed some

More information

CHAPTER 22 COST-VOLUME-PROFIT ANALYSIS

CHAPTER 22 COST-VOLUME-PROFIT ANALYSIS CHAPTER 22 COST-VOLUME-PROFIT ANALYSIS Related Assignment Materials Student Learning Objectives Conceptual objectives: C1. Describe different types of cost behavior in relation to production and sales

More information

COST DATA FOR SHORT-RUN TACTICAL DECISION MAKING

COST DATA FOR SHORT-RUN TACTICAL DECISION MAKING COST DATA FOR SHORT-RUN TACTICAL DECISION MAKING To decide on the acceptance or rejection of a special order from a supplier, marginal costing and contribution analysis should be applied. The company may

More information

BUSINESS BUILDER 7 HOW TO ANALYZE PROFITABILITY

BUSINESS BUILDER 7 HOW TO ANALYZE PROFITABILITY BUSINESS BUILDER 7 HOW TO ANALYZE PROFITABILITY zions business resource center 2 how to analyze profitability Although pride of ownership and career satisfaction are healthy goals, generating profit is

More information

Chapter 5: Markup & Markdown

Chapter 5: Markup & Markdown HOSP 1107 (Business Math) Learning Centre Chapter 5: Markup & Markdown MARKUP Businesses buy products at a cost price and then markup the products to cover the expenses (overhead) of running the business

More information

Helena Company reports the following total costs at two levels of production.

Helena Company reports the following total costs at two levels of production. Chapter 22 Helena Company reports the following total costs at two levels of production. 10,000 Units 20,000 Units Direct materials $20,000 $40,000 Maintenance 8,000 10,000 Direct labor 17,000 34,000 Indirect

More information

Chapter 03.00F Physical Problem for Nonlinear Equations Industrial Engineering

Chapter 03.00F Physical Problem for Nonlinear Equations Industrial Engineering Chapter 3.F Physical Problem for Nonlinear Equations Industrial Engineering Problem Statement You have been recently employed by a start-up computer assembly company called the MOM AND POP COMPUTER SHOP.

More information

Microeconomics and mathematics (with answers) 5 Cost, revenue and profit

Microeconomics and mathematics (with answers) 5 Cost, revenue and profit Microeconomics and mathematics (with answers) 5 Cost, revenue and profit Remarks: = uantity Costs TC = Total cost (= AC * ) AC = Average cost (= TC ) MC = Marginal cost [= (TC)'] FC = Fixed cost VC = (Total)

More information

Section 12.1 Financial Ratios Section 12.2 Break-Even Analysis

Section 12.1 Financial Ratios Section 12.2 Break-Even Analysis Section 12.1 Financial Ratios Section 12.2 Break-Even Analysis OBJECTIVES Explain what a financial ratio is Describe how income statements are used for financial analysis Compare operating ratios and return-on-sales

More information

McGraw-Hill/Irwin Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Annuities and Sinking Funds McGraw-Hill/Irwin Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved. #13 LU13.1 Annuities and Sinking Funds Learning Unit Objectives Annuities:

More information

Financial. Management FOR A SMALL BUSINESS

Financial. Management FOR A SMALL BUSINESS Financial Management FOR A SMALL BUSINESS Welcome 1. Agenda 2. Ground Rules 3. Introductions FINANCIAL MANAGEMENT 2 Objectives Explain the concept of financial management and its importance to a small

More information

It is important to know the following assumptions in CVP analysis before we can use it effectively.

It is important to know the following assumptions in CVP analysis before we can use it effectively. Cost-Volume-Profit analysis (Relevant to AAT Examination Paper 3 Management Accounting) Li Tak Ming, Andy, Deputy Head, Department of Business Administration, Hong Kong Institute of Vocational Education

More information

Breakeven Analysis. Breakeven for Services.

Breakeven Analysis. Breakeven for Services. Dollars and Sense Introduction Your dream is to operate a profitable business and make a good living. Before you open, however, you want some indication that your business will be profitable, if not immediately

More information

Pricing and Credit Decisions

Pricing and Credit Decisions CHAPTER OUTLINE Spotlight: Dynamic Network Services (http://www.dyn.com) 1 Setting a Price Discuss the role of cost and demand factors in setting a price. Cost Determination for Pricing Total cost includes

More information

Module 12 : Cost Volume Profit Analysis. Lecture 1 : Cost Volume Profit Analysis

Module 12 : Cost Volume Profit Analysis. Lecture 1 : Cost Volume Profit Analysis Module 12 : Cost Volume Profit Analysis Lecture 1 : Cost Volume Profit Analysis Objectives In this lecture you will learn the following Cost Volume Profit (CVP) Introduction. Fixed costs. Variable costs.

More information

Pricing Your Work (Overhead Recovery Review)

Pricing Your Work (Overhead Recovery Review) Pricing Your Work (Overhead Recovery Review) To accurately price your work, you need to be aware of three main factors: 1. The Estimate these costs are the direct costs of labor, equipment, materials,

More information

House Published on www.jps-dir.com

House Published on www.jps-dir.com I. Cost - Volume - Profit (Break - Even) Analysis A. Definitions 1. Cost - Volume - Profit (CVP) Analysis: is a means of predicting the relationships among revenues, variable costs, and fixed costs at

More information

Chapter 25 Cost-Volume-Profit Analysis Questions

Chapter 25 Cost-Volume-Profit Analysis Questions Chapter 25 Cost-Volume-Profit Analysis Questions 1. Cost-volume-profit analysis is used to accomplish the first step in the planning phase for a business, which involves predicting the volume of activity,

More information

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis Cost-Volume-Profit Analysis Cost-Volume-Profit Assumptions and Terminology 1 Changes in the level of revenues and costs arise only because of changes in the number of product (or service) units produced

More information

2. A service company earns net income by buying and selling merchandise. Ans: False

2. A service company earns net income by buying and selling merchandise. Ans: False Chapter 6: Accounting For Merchandising Activities True/False 1. Merchandise consists of products that a company acquires for the purpose of reselling them to customers. 2. A service company earns net

More information

Copyright 2001-2007 by Patsula Media. All rights reserved. From the creators of Smallbuisnesstown TM.

Copyright 2001-2007 by Patsula Media. All rights reserved. From the creators of Smallbuisnesstown TM. The ENTREPRENUER S Guidebook Series TM THANKS for selecting this guidebook! Many hours of painstaking work have gone into its creation. Send feedback or suggestions to www.patsulamedia.com. And check out

More information

Cost-Volume-Profit Analysis and Pricing Decisions

Cost-Volume-Profit Analysis and Pricing Decisions photo: Tischenko Irina/Shutterstock CHAPTER 3 Cost-Volume-Profit Analysis and Pricing Decisions Unit Summaries Unit 3.1 Breakeven Analysis Using Universal Sports Exchange s results from 2014, the unit

More information

To Multiply Decimals

To Multiply Decimals 4.3 Multiplying Decimals 4.3 OBJECTIVES 1. Multiply two or more decimals 2. Use multiplication of decimals to solve application problems 3. Multiply a decimal by a power of ten 4. Use multiplication by

More information

CHAPTER 22. Cost-Volume-Profit Relationships ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief

CHAPTER 22. Cost-Volume-Profit Relationships ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief CHAPTER 22 Cost-Volume-Profit Relationships ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems * 1. Distinguish between variable and fixed costs.

More information

6.1 UNIT COST CALCULATIONS AND THE BREAK EVEN. Working Out Costs - The Terminology. How To Work Out Your Break Even Point

6.1 UNIT COST CALCULATIONS AND THE BREAK EVEN. Working Out Costs - The Terminology. How To Work Out Your Break Even Point 6.1 COSTS AND COSTING 6 UNIT COST CALCULATIONS AND THE BREAK EVEN..... Working Out Costs - The Terminology How To Work Out Your Break Even Point Costing And Break Even Exercise Costing The Job Exercises

More information

Cost Behavior and Cost-Volume-Profit Analysis QUESTIONS

Cost Behavior and Cost-Volume-Profit Analysis QUESTIONS Chapter 18 Cost Behavior and Cost-Volume-Profit Analysis QUESTIONS 1. A variable cost is one that varies proportionately with the volume of activity. For example, direct materials and direct labor (when

More information

Break-Even Point and Cost-Volume-Profit Analysis

Break-Even Point and Cost-Volume-Profit Analysis 9 Break-Even Point and Cost-Volume-Profit Analysis Objectives After completing this chapter, you should be able to answer the following questions: LO.1 LO.2 LO.3 LO.4 LO.5 LO.6 What is the break-even point

More information

Frequently Used Formulas for Managing Operations

Frequently Used Formulas for Managing Operations Frequently Used Formulas for Managing Operations Chapter 1 - Hospitality Industry Accounting Revenue Expenses = Profit Assets = Liabilities + Owners Equity Chapter 2 - Accounting Fundamentals Review Assets

More information

Cost-Volume-Profit. Managerial Accounting Fifth Edition Weygandt Kimmel Kieso. Page 5-2

Cost-Volume-Profit. Managerial Accounting Fifth Edition Weygandt Kimmel Kieso. Page 5-2 5-1 Cost-Volume-Profit Managerial Accounting Fifth Edition Weygandt Kimmel Kieso 5-2 study objectives 1. Distinguish between variable and fixed costs. 2. Explain the significance of the relevant range.

More information

_ HOW TO FIGURE PERCENT _

_ HOW TO FIGURE PERCENT _ _ HOW TO FIGURE PERCENT _ This learning packet will take you through the basic steps of working with percentages so you can solve problems like the ones below: Example: My family has just eaten dinner

More information

Quick Reference for Key Category Management Calculations

Quick Reference for Key Category Management Calculations Quick Reference for Key Category Management Calculations Average Price - Reflects the average product price in retail stores REGARDLESS of merchandising activity (displays, features, temporary price reductions).

More information

IGCSE Business Studies revision notes Finance Neil.elrick@tes.tp.edu.tw

IGCSE Business Studies revision notes Finance Neil.elrick@tes.tp.edu.tw IGCSE FINANCE REVISION NOTES Table of contents Table of contents... 2 SOURCES OF FINANCE... 3 CASH FLOW... 5 HOW TO CALCULATE THE CASH BALANCE... 5 HOW TO WORK OUT THE CASH AVAILABLE TO THE BUSINESS...

More information

Accounting for a Merchandising Business

Accounting for a Merchandising Business CHAPTER 10 Accounting for a Merchandising Business SECTION 10.1 REVIEW QUESTIONS (page 401) 1. A service business sells a service to the general public but does not deal in merchandise. For example, a

More information

C 5 - COST BEHAVIOR: ANALYSIS AND USE notes-c5.doc Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM

C 5 - COST BEHAVIOR: ANALYSIS AND USE notes-c5.doc Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM C 5 - COST BEHAVIOR: ANALYSIS AND USE notes-c5.doc CHAPTER LEARNING OBJECTIVES: MAJOR: - Use the High-Low method to determine and calculate the structure of a cost. - Define, explain and use variable,

More information

> DO IT! Chapter 6. CVP Income Statement D-1. Solution. Action Plan

> DO IT! Chapter 6. CVP Income Statement D-1. Solution. Action Plan Chapter 6 CVP Income Statement Use the CVP income statement format. Use the formula for contribution margin per unit. Use the formula for the contribution margin ratio. Garner Inc. sold 20,000 units and

More information

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline I. Merchandising Activities Products that a company acquires to resell to customers are referred to as merchandise (also called goods). A merchandiser earns net income by buying and selling merchandise.

More information

Financial Statements LESSON 15. What are Financial Statements?

Financial Statements LESSON 15. What are Financial Statements? Financial Statements LESSON 15 Main Idea Business owners must have accurate and timely information about the fi nancial status of their business to make the best decisions. Most of this fi nancial information

More information

mienterprise. More detailed Business Plan

mienterprise. More detailed Business Plan mienterprise. More detailed Business Plan For:!!!!!!!!! Date: SUMMARY What is your business going to be? What are your goals? Short term (one year) 1. 2. 3. Longer term (over one year) 1. 2. 3. ABOUT YOU

More information

CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS

CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 3-1

More information

Gross Sales (Gross Revenue): the total amount of money received from customers

Gross Sales (Gross Revenue): the total amount of money received from customers Chapter 17 Financial Statements and Ratios 17.1: The Income Statement 17.1.1: Learn the terms used with income statements Income Statement: a financial statement used to summarize all income and expenses

More information

Understanding Financial Statements. For Your Business

Understanding Financial Statements. For Your Business Understanding Financial Statements For Your Business Disclaimer The information provided is for informational purposes only, does not constitute legal advice or create an attorney-client relationship,

More information

Money Math for Teens. Revenue, Expenses and the Break-Even Point

Money Math for Teens. Revenue, Expenses and the Break-Even Point Money Math for Teens Revenue, Expenses and the Break-Even Point This Money Math for Teens lesson is part of a series created by Generation Money, a multimedia financial literacy initiative of the FINRA

More information

Computing the Total Assets, Liabilities, and Owner s Equity

Computing the Total Assets, Liabilities, and Owner s Equity 21-1 Assets are the total of your cash, the items that you have purchased, and any money that your customers owe you. Liabilities are the total amount of money that you owe to creditors. Owner s equity,

More information

Your Guide to Profit Guard

Your Guide to Profit Guard Dear Profit Master, Congratulations for taking the next step in improving the profitability and efficiency of your company! Profit Guard will provide you with comparative statistical and graphical measurements

More information

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

More information

The University of Georgia

The University of Georgia The University of Georgia Center for Agribusiness and Economic Development College of Agricultural and Environmental Sciences Estimating a Business Opportunity s Economic Vitality DRAFT Prepared by: Kent

More information

Chapter 19 (4) Cost Behavior and Cost-Volume-Profit Analysis Study Guide Solutions Fill-in-the-Blank Equations

Chapter 19 (4) Cost Behavior and Cost-Volume-Profit Analysis Study Guide Solutions Fill-in-the-Blank Equations Chapter 19 (4) Cost Behavior and Cost-Volume-Profit Analysis Study Guide Solutions Fill-in-the-Blank Equations 1. Variable cost per unit 2. Fixed cost 3. Variable costs 4. Contribution margin 5. Change

More information

Option Theory Basics

Option Theory Basics Option Basics What is an Option? Option Theory Basics An option is a traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon, or derived

More information

4 MARKETING METRICS: Measuring Sales Force Effectiveness & Channel Management

4 MARKETING METRICS: Measuring Sales Force Effectiveness & Channel Management Sales Force and Channel Management This e-book deals with push marketing. It describes how marketers measure the adequacy and effectiveness of the systems that provide customers with reasons and opportunities

More information