1 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. The mix of products sold. AGENDA A. Review of contribution income statement. B. Effects of changes in sales volume on net operating income. C. CVP relationships in equation form D. CVP and profit graphs. E. Contribution margin (CM) ratio. F. Target profit analysis. G. Break-even analysis. H. Margin of safety. I. Operating leverage. J. Multiproduct break-even analysis.
2 TM 5-2 THE CONTRIBUTION APPROACH A contribution format income statement is very useful in CVP analysis because it highlights cost behavior. EXAMPLE: Last month s contribution income statement for Nord Corporation, a manufacturer of exercise bicycles, follows: Total Per Unit Sales (500 bikes)... $250,000 $500 Variable expenses , Contribution margin ,000 $200 Fixed expenses... 80,000 Net operating income... $ 20,000 CONTRIBUTION MARGIN: The amount that sales (net of variable expenses) contributes toward covering fixed expenses and then toward profits. The unit contribution margin remains constant so long as the selling price and the unit variable cost do not change.
3 TM 5-3 VOLUME CHANGES AND NET OPERATING INCOME Contribution income statements are given on this and the following page for monthly sales of 1, 2, 400, and 401 bikes. Total Per Unit Sales (1 bike)... $ 500 $500 Variable expenses Contribution margin $200 Fixed expenses... 80,000 Net operating income (loss).. $(79,800) Total Per Unit Sales (2 bikes)... $ 1,000 $500 Variable expenses Contribution margin $200 Fixed expenses... 80,000 Net operating income (loss).. $(79,600) Note the following points: 1. The contribution margin must first cover the fixed expenses. If it doesn t, there is a loss. 2. As additional units are sold, fixed expenses are whittled down until they have all been covered.
4 TM 5-4 VOLUME CHANGES AND NET OPERATING INCOME (continued) Total Per Unit Sales (400 bikes)... $200,000 $500 Variable expenses , Contribution margin... 80,000 $200 Fixed expenses... 80,000 Net operating income (loss)... $ 0 Total Per Unit Sales (401 bikes)... $200,500 $500 Variable expenses , Contribution margin... 80,200 $200 Fixed expenses... 80,000 Net operating income (loss)... $ 200 Note the following points: 1. If the company sells exactly 400 bikes a month, it will just break even (no profit or loss). 2. The break-even point is: The point where total sales revenue equals total expenses (variable and fixed). The point where total contribution margin equals total fixed expenses. 3. Each additional unit sold increases net operating income by the amount of the unit contribution margin.
5 TM 5-5 CVP RELATIONSHIPS IN EQUATION FORM Terry s Way shown in class: Sales = Variable + Fixed + Net income $500X = $300X + $80,000 + $0 $200X = $80,000 $200X = $80,000 $200 $200 X = 400 even Sales = Variable + Fixed + Net income $500X = $300X + $80,000 + $70,000 $200X = $150,000 $200X = $150,000 $200 $200 X = 750 even + $70,000 profit
6 TM 5-6 Garrison Textbook Way: The contribution format income statement can be expressed in equation form as follows: Profit = (Sales Variable expense) Fixed expense When a company has a single product, we can further refine the equation as follows: Profit = (P Q V Q) Fixed expense EXAMPLE: This equation can be used to compute Nord Company s net operating income if it sells 401 bikes: Profit = ($ $ ) $80,000 = ($500 $300) 401 $80,000 = ($200) 401 $80,000 = $80,200 $80,000 = $200 It is often useful to express the simple profit equation in terms of the unit contribution margin as follows: Profit = Unit CM Q Fixed expense This equation can also be used to compute Nord Company s net operating income if it sells 401 bikes: Profit = $ $80,000 Profit = $80,200 $80,000 = $200
7 TM 5-7 PREPARING A CVP GRAPH
8 TM 5-8 THE COMPLETED CVP GRAPH
9 Profit TM 5-9 THE PROFIT GRAPH $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 -$5,000 -$10,000 -$15,000 -$20,000 -$25,000 -$30,000 -$35,000 -$40,000 -$45,000 -$50,000 -$55,000 -$60,000 -$65,000 -$70,000 -$75,000 -$80,000 -$85,000 -$90, Volume in bikes sold Notice, the straight line goes through two data points at (0, -$80,000) and (525, $25,000). The break-even point is denoted by the dotted line at 400 bikes.
10 TM 5-10 CONTRIBUTION MARGIN RATIO The contribution margin (CM) ratio is the ratio of contribution margin to total sales: Contribution margin CM ratio= Total sales If the company has only one product, the CM ratio can also be computed using per unit data: Unit contribution margin CM ratio= Unit selling price EXAMPLE: For Nord Corporation, the CM ratio is 40%, computed as follows: Contribution margin $100,000 CM ratio= = =40% Total sales $250,000 or Unit contribution margin $200 per unit CM ratio= = =40% Unit selling price $500 per unit The relation between profit and the CM ratio can also be expressed using the following equation: Profit = CM ratio Sales Fixed expense EXAMPLE: Nord Company s profit if it sells 401 bikes can be computed as follows: Profit = 0.40 $200,500 $80,000 Profit = $80,200 $80,000 = $200
11 TM 5-11 CONTRIBUTION MARGIN RATIO (continued) The CM ratio shows how the contribution margin will be affected by a given change in total sales. EXAMPLE: Assume that Nord Corporation s sales increase by $150,000 next month. What will be the effect on (1) the contribution margin and (2) net operating income? (1) Effect on contribution margin: Increase in contribution margin = Increase in sales CM ratio (2) Effect on net operating income: = $150,000 40% = $60,000 If fixed expenses do not change, the net operating income for the month will also increase by $60,000. Present Expected Change Sales (in units) Sales (in dollars)... $250,000 $400,000 $150,000 Variable expenses , ,000 90,000 Contribution margin , ,000 60,000 Fixed expenses... 80,000 80,000 0 Net operating income... $ 20,000 $ 80,000 $ 60,000
12 TM 5-12 TARGET PROFIT ANALYSIS Summary of Nord Corporation Data: Per Bike Percent Per Month Selling price... $ % Variable expenses % Contribution margin... $200 40% Fixed expenses... $80,000 EXAMPLE: Assume that Nord Corporation s target profit is $70,000 per month. How many exercise bikes must it sell to reach this goal? EQUATION METHOD (Unit sales) Q = Number of bikes to attain the target profit Profit = Unit CM Q Fixed Expenses $70,000 = $200 Q $80,000 Q = 750 Bikes EQUATION METHOD (Sales dollars) What if Nord wanted to know how much sales revenue needed to be generated to achieve a target profit of $70,000? We can compute the answer two ways. First, we can multiply the answer from above by the selling price per bike: 750 bikes $500 per bike = $375,000 Or, we can use the following equation: Profit = CM ratio Sales Fixed Expenses $70,000 = 0.40 Sales $80,000 Sales = $375,000
13 TM 5-13 TARGET PROFIT ANALYSIS (continued) Summary of Nord Corporation Data: Per Bike Percent Per Month Selling price... $ % Variable expenses % Contribution margin... $200 40% Fixed expenses... $80,000 EXAMPLE: Assume that Nord Corporation s target profit is $70,000 per month. How many exercise bikes must it sell to reach this goal? FORMULA METHOD (Unit sales) Unit sales to Target profit + Fixed expense = attain a target profit Unit CM Unit sales to $70,000 + $80,000 = = 750 bikes attain a target profit $200 per bike FORMULA METHOD (Dollar sales) What if Nord wanted to know how much sales revenue needed to be generated to achieve a target profit of $70,000? We can use the following formula to derive the answer: Dollar sales to = Target profit + Fixed expense breakeven CM ratio $70,000 + $80,000 Dollar sales to = =$200,000 breakeven 0.40
14 TM 5-14 BREAK-EVEN ANALYSIS Summary of Nord Corporation Data: Per Bike Percent Per Month Selling price... $ % Variable expenses % Contribution margin... $200 40% Fixed expenses... $80,000 EXAMPLE: Using the equation method, we can compute Nord Company s break-even point in unit sales as follows: EQUATION METHOD (Unit sales) Profit = Unit CM Q Fixed expense $0 = $200 Q $80,000 $200 Q = $0 +$80,000 Q = ($0 + $80,000) $200 Q = 400 bikes EXAMPLE: Using the equation method, we can compute Nord Company s break-even point in dollar sales as follows: EQUATION METHOD (Dollar sales) Profit = CM ratio Sales Fixed Expenses $0 = 0.40 Sales $80, Sales = $0 + $80,000 Sales = ($0 +$80,000) 0.40 Sales = $200,000
15 TM 5-15 BREAK-EVEN ANALYSIS (continued) Summary of Nord Corporation Data: Per Bike Percent Per Month Selling price... $ % Variable expenses % Contribution margin... $200 40% Fixed expenses... $80,000 EXAMPLE: Using the formula method, we can compute Nord Company s break-even point in unit sales as follows: FORMULA METHOD (Units sales) Unit sales to = Fixed expense breakeven Unit CM Unit sales to $80,000 = =400 bikes breakeven $200 per bike FORMULA METHOD (Dollar sales) EXAMPLE: Using the formula method, we can compute Nord Company s break-even point in dollar sales as follows: Dollar sales to = Fixed expense breakeven CM ratio $80,000 Dollar sales to = =$200,000 breakeven 0.40
16 TM 5-16 MARGIN OF SAFETY The margin of safety is the excess of budgeted (or actual) sales over the break-even sales. The margin of safety can be expressed either in dollar or percentage form. The formulas are: Margin of safety =Total sales-breakeven sales in dollars Margin of safety = Margin of safety in dollars percentage Total sales Company X Company Y Sales... $500, % $500, % Variable expenses ,000 70% 100,000 20% Contribution margin ,000 30% 400,000 80% Fixed expenses... 90, ,000 Net operating income... $ 60,000 $ 60,000 Break-even point: $90, $300,000 $340, $425,000 Margin of safety in dollars: $500,000 $300, $200,000 $500,000 $425, $75,000 Margin of safety percentage: $200,000 $500, % $75,000 $500, %
17 TM 5-17 OPERATING LEVERAGE Operating leverage measures how a given percentage change in sales affects net operating income. Degree of Contribution margin = operating leverage Net operating income Company X Company Y Sales... $500, % $500, % Variable expenses ,000 70% 100,000 20% Contribution margin ,000 30% 400,000 80% Fixed expenses... 90, ,000 Net operating income... $ 60,000 $ 60,000 Degree of operating leverage If the degree of operating leverage is 2.5, then a 10% increase in sales should result in a 25% (= %) increase in net operating income. EXAMPLE: Assume that both company X and company Y experience a 10% increase in sales: Company X Company Y Sales... $550, % $550, % Variable expenses ,000 70% 110,000 20% Contribution margin ,000 30% 440,000 80% Fixed expenses... 90, ,000 Net operating income... $ 75,000 $100,000 Increase in net operating income.. 25% 67%
18 TM 5-18 OPERATING LEVERAGE (continued) The degree of operating leverage is not constant it changes with the level of sales. EXAMPLE: At the higher level of sales, the degree of operating leverage for Company X decreases from 2.5 to 2.2 and for Company Y from 6.7 to 4.4. Company X (000s) Company Y (000s) Sales... $500 $550 $500 $550 Variable expenses Contribution margin Fixed expenses Net operating income... $ 60 $ 75 $ 60 $100 Degree of operating leverage Ordinarily, the degree of operating leverage declines as sales increase.
19 TM 5-19 MULTIPRODUCT BREAK-EVEN ANALYSIS When a company has multiple products, the overall contribution margin (CM) ratio is used in breakeven analysis. Total contribution margin Overall CM ratio= Total sales dollars Product A Product B Total Sales... $100, % $300, % $400, % Variable expenses... 70,000 70% 120,000 40% 190, % Contribution margin... $ 30,000 30% $180,000 60% 210, % Fixed expenses ,750 Net operating income... $ 68,250 Total contribution margin $210,000 Overall CM ratio= = =52.5% Total sales dollars $400,000 Fixed expenses $141,750 Breakeven sales= = =$270,000 Overall CM ratio 0.525
20 TM 5-20 MULTIPRODUCT BREAK-EVEN ANALYSIS (continued) The relative proportions in which the products are sold is called the sales mix. If the sales mix changes, the overall contribution margin ratio will change. Example: Assume that total sales remain unchanged at $400,000. However, the sales mix shifts so that more of Product A is sold than of Product B. Product A Product B Total Sales... $300, % $100, % $400, % Variable expenses ,000 70% 40,000 40% 250, % Contribution margin... $ 90,000 30% $ 60,000 60% 150, % Fixed expenses ,750 Net operating income... $ 8,250 Total contribution margin $150,000 Overall CM ratio= = =37.5% Total sales dollars $400,000 Fixed expenses $141,750 Breakeven sales= = =$378,000 Overall CM ratio 0.375
21 TM 5-21 MAJOR ASSUMPTIONS OF CVP ANALYSIS 1. Selling price is constant. The price does not change as volume changes. 2. Costs are linear and can be accurately split into fixed and variable elements. The total fixed cost is constant and the variable cost per unit is constant. 3. The sales mix is constant in multi-product companies. 4. In manufacturing companies, inventories do not change. The number of units produced equals the number of units sold.
Chapter 6 Cost-Volume-Profit Relationships 6-2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain how changes in activity affect contribution margin. 2. Compute the contribution
Chapter 6-1 Chapter 6 Cost-Volume-Profit Relationships McGraw-Hill /Irwin The McGraw-Hill Companies, Inc., 2007 Basics of Cost-Volume-Profit Analysis Contribution Margin (CM) is the amount remaining from
Assumptions of CVP Analysis Cost-Volume-Profit Analysis Expenses can be classified as either variable or fixed. CVP relationships are linear over a wide range of production and sales. Sales prices, unit
Part Five Cost Volume Profit Analysis COST VOLUME PROFIT ANALYSIS Study of the effects of changes of costs and volume on a company s profits A critical factor in management decisions Important in profit
Cost-Volume-Profit Analysis Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there
Chapter 18 Identify how changes in volume affect Total variable change in direct proportion to changes in the volume of activity Unit variable cost remains constant Units produced 3 5 Total direct materials
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.
Accounting Building Business Skills Paul D. Kimmel Chapter Fourteen: Cost-volume-profit Relationships PowerPoint presentation by Kate Wynn-Williams University of Otago, Dunedin 2003 John Wiley & Sons Australia,
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
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
Chapter 6 Cost-Volume-Profit Relationships Solutions to Questions 6-1 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can be used in a variety
SOLUTIONS TO EXERCISES EXERCISE 3-1 (20 minutes) 1. Fixed costs B E point in units = Contribution margin per unit $180,000 $180,000 = = = 7,500 units $40 - $16 $24 B E point in sales dollars = Fixed costs
Accounting 610 2C Cost-Volume-Profit Relationships Page 1 I. OVERVIEW A. The managerial accountant uses analytical tools to advise line managers in decision making functions. C-V-P (CVP) analysis provides
Study Unit 8 CVP Analysis and Marginal Analysis SU- 8.1 Cost-Volume-Profit (CVP) Analysis - Theory CVP = Break-even analysis Allows us to analyze the relationship between revenue and fixed and variable
01 technical cost-volumeprofit relevant to acca qualification paper F5 In any business, or, indeed, in life in general, hindsight is a beautiful thing. If only we could look into a crystal ball and find
CHAPTER II LITE RATURE STUDY 2.1. Cost Terminology Based on Charles T.Horngren (2009: 53), cost is a resource sacrificed or forgone to achieve a specific objective. A cost is usually measured as the monetary
Chapter 6 Notes Page 1 Cost-Volume-Profit Analysis Understanding the relationship between a firm s costs, profits and its volume levels is very important for strategic planning. When you are considering
Chapter-3D CVP ANALYSIS AND OPERATING LEVERAGE BSNL, India For Internal Circulation Only 1 CVP ANALYSIS AND OPERATING LEVERAGE Introduction: Cost Volume Profit analysis is a study of the interrelationship
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
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
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
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
Linear Equations and Inequalities Section 1.1 Prof. Wodarz Math 109 - Fall 2008 Contents 1 Linear Equations 2 1.1 Standard Form of a Linear Equation................ 2 1.2 Solving Linear Equations......................
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
CHAPTER 3 Overview Cost-Volume-Profit Analysis This chapter explains a planning tool called costvolume-profit (CVP) analysis. CVP analysis examines the behavior of total revenues, total costs, and operating
An Statement Teaching Approach for Cost-Volume-Profit (CVP) Analysis by Using a Company s CVP Model Freddie Choo San Francisco State University Kim B. Tan California State University Stanislaus This paper
Cost-Volume-Profit Analysis Page 1 2. Cost-Volume-Profit Analysis Now that we have discussed a company s cost function, learned how to identify its fixed and variable costs. We will now discuss a manner
1. CVP analysis and purposes: Profit per unit of a product depends on its selling price and cost of sales. Total profit depends on sales volume which in turn depends inter alia on selling price. By and
Professional Development Programme on Enriching Knowledge of the Business, Accounting and Financial Studies (BAFS) Curriculum Course 1 : Contemporary Perspectives on Accounting Unit 8 : Cost Accounting
Summary Chapter Five Cost Volume Relations & Break Even Analysis 1. Introduction : The main aim of an undertaking is to earn profit. The cost volume profit (CVP) analysis helps management in finding out
Section 1.5: Linear Models An asset is an item owned that has value. Linear Depreciation refers to the amount of decrease in the book value of an asset. The purchase price, also known as original cost,
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
Managerial Accounting Prof. Dr. Vardaraj Bapat Department of School of Management Indian Institute of Technology, Bombay Lecture - 26 Cost Volume Profit Analysis Dear participations in our early session,
MANAGEMENT ACCOUNTING Cost-Volume-Profit Analysis Zofia Krokosz-Krynke, Ph.D., MBA firstname.lastname@example.org Wroclaw University of Technology, Building B4 Room 521 http://www.ioz.pwr.edu.pl/pracownicy/krokosz/
Problem 3-22 Marlin Company Sales Mix; Multiproduct Break-Even Analysis (LO 3-9) 1. Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products sinks,
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.
Chapter 3: Cost-Volume-Profit Analysis and Planning Agenda Direct Materials, Direct Labor, and Overhead Traditional vs. Contribution Margin Income Statements Cost-Volume-Profit (CVP) Analysis Profit Planning
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
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
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
1. Introduction The cost volume profit (CVP) analysis helps management in finding out the relationship of costs and revenues to profit. Cost depends on various factors like Volume of production Product
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
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
Republic Polytechnic Continuing Education & Training Course Structure for : Finance Management Module Finance Management Description Finance Management is a module that serves to cover key financial aspects
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
15 COST-VOLUME-PROFIT ANALYSIS: A MANAGERIAL PLANNING TOOL DISCUSSION QUESTIONS 1. CVP analysis allows managers to focus on selling prices, volume, costs, profits, and sales mix. Many different what-if
Answers for Weekly Challenge 2 Challenge 1 (i) The key to calculating the breakeven point is to determine the contribution per unit. Contribution point = $120 ($22 + $36 + $14) = $48 Fixed overhead Breakeven
Chapter 5 Break-even analysis (CVP analysis) 1 5.1 Introduction Cost-volume-profit (CVP) analysis looks at how profit changes when there are changes in variable costs, sales price, fixed costs and quantity.
Types of Cost Behavior Patterns Cost Behavior: Analysis and Use Chapter Five Recall the summary of our cost behavior discussion from an earlier chapter. Summary of Variable and Fixed Cost Behavior Cost
Page 1 of 28 Module 4: Cost behaviour and cost-volume-profit analysis Required reading Chapter 5, pages 187-213 Chapter 6, pages 230-253 Appendix 6A, pages 256-258 Overview The way in which a cost responds
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer Managerial accounting Chapter One Managerial Accounting: An Overview 1 Chapter Two Managerial Accounting and Cost Concepts 24 Chapter Three Job-Order Costing
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
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
Part 1 of 3 Turning Budgets How to use an Excel-based budget to analyze company performance By Jason Porter and Teresa Stephenson, CMA 34 STRATEGIC FINANCE I July 2011 into Business ILLUSTRATION: ROBERT
3.3 Applications of Linear Functions A function f is a linear function if The graph of a linear function is a line with slope m and y-intercept b. The rate of change of a linear function is the slope m.
Multiproduct Appendix 11A Break-Even Analysis Before concluding our discussion, we should consider one additional application of the ideas that we have developed the use of CVP concepts in analyzing the
BREAK-EVEN ANALYSIS In your business planning, have you asked questions like these? How much do I have to sell to reach my profit goal? How will a change in my fixed costs affect net income? How much do
c04.qxd 6/2/06 2:53 PM Page 124 CHAPTER 4 LEARNING OBJECTIVES 1 2 3 4 5 6 Identify common cost behavior patterns. Estimate the relation between cost and activity using account analysis and the high-low
Math 1314 Lesson 8 Business Applications: Break Even Analysis, Equilibrium Quantity/Price Three functions of importance in business are cost functions, revenue functions and profit functions. Cost functions
12 CHAPTER Managerial Accounting and Cost-Volume-Profit When asked by a marketing or production manager what a certain item or activity costs, the management accountant who asks Why do you want to know?
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.
19 Cost-Volume-Profit Analysis Learning Objectives 1 Identify how changes in volume affect costs 2 Use CVP analysis to compute breakeven points 3 Use CVP analysis for profit planning, and graph the CVP
Management Accounting 243 Pricing Decision Analysis The setting of a price for a product is one of the most important decisions and certainly one of the more complex. A change in price not only directly
4 Cost-Volume-Profit Analysis: A Managerial Planning Tool After studying Chapter 4, you should be able to: 1 Determine the break-even point in number of units and in total sales dollars. 2 Determine the
Cost-Volume-Profit Analysis Calculating The Break-Even Point P = Selling Price Per Unit Units Produced and Sold V = Variable Cost Per Unit F = Total Fixed Costs OP = Operating Profits-Before Tax t = Tax
Creating a Successful Financial Plan Basic Financial Reports Balance Sheet - Estimates the firm s worth on a given date; built on the accounting equation: Assets = Liabilities + Owner s Equity Income Statement
Chapter 4 Solutions Question 4.1 A) Explain the following The term marginal cost refers to the additional costs incurred in providing a unit of product or service. The term contribution refers to the amount
Financial Analysis, Modeling, and Forecasting Techniques Course #5710B/QAS5710B Course Material TECHNIQUES OF FINANCIAL ANALYSIS, MODELING, AND FORECASTING Delta Publishing Company Copyright 2011 by DELTA
Prepare, Apply, and Confirm etext Features Keep students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material through author-created solutions
6-1 Cost-Volume-Profit Analysis: Additional Issues 6-2 Managerial Accounting Fifth Edition Weygandt Kimmel Kieso study objectives 1. Describe the essential features of a cost-volume-profit income statement.
Managerial Accounting 2011 First semester Takayuki Asada 1 Chapter4 Cost-Volume-Profit Analysis After reading this chapter, you will be able to: Identify common cost behavior patterns. Estimate the relation
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,
Breakeven, Leverage, and Elasticity Dallas Brozik, Marshall University Breakeven Analysis Breakeven analysis is what management is all about. The idea is to compare where you are now to where you might