Cvpanalysis 100114232949 Phpapp01

CHAPTER 3
COST-VOLUME-PROFIT ANALYSIS
Cost Accounting: A managerial emphasis
By: Horgren, C., Foster, G., and S. Datar
GROUP 3 :
Ecleo, D., Ongy E., and A. Tulin
CHAPTER 3
1. Understand basic cost-volume-profit (CVP) assumptions

Learning Objectives:
2. Explain essential features of CVP analysis
3. Determine the break-even point and output to achieve targ
et operating income
4. Incorporate income tax considerations into CVP analysis
5. Explain the use of CVP analysis in decision making and how
sensitivity analysis can help managers cope with uncertai
nty
6. Use CVP analysis to plan costs
7. Apply CVP analysis to a multiproduct company
8. Adapt CVP analysis to multi cost drivers situations
9. Distinguish between contribution margin and gross margin
CHAPTER 3
Objective 1
Cost-Volume-Profit Assumptions and

Terminology
1. Changes in the level of revenues and costs arise only
bec. of changes in the number of product (or service)
units produced and sold.
2. Total costs can be divided into a fixed component
and a component that is variable with respect to the
level of output.
3. When graphed, the behavior of total revenues and
total costs is linear in relation to output units within
the relevant range (and time period).
CHAPTER 3
Objective 1
4. The unit selling price, unit variable costs, and fixed

costs are known and constant.
5. The analysis either covers a single product or
assumes that the sales mix when multiple
products are sold will remain constant as the level
of total units sold changes.
6. All revenues and costs can be added and
compared without taking into account the time and
value of money.
CHAPTER 3
Objective 1
Operating income = Total revenues

from operations
Cost of goods sold and

and operating costs
(excluding income taxes)
NET INCOME = operating income + nonoperating revenues (such

as interest revenue) nonoperating costs
income taxes
NET INCOME = Operating income Income taxes
Back to learning objectives
CHAPTER 3
Objective 2
Essentials of Cost-Volume-Profit Analysis

EXAMPLE:
Mary Frost plans to sell Do-All Software, a home office
software package, at a heavily attended two-day
computer convention in Chicago. Mary can purchase this
software from a computer software wholesaler at $120
per package with the privilege of returning all unsold
units and receiving a full $120 refund per package. The
units (packages) will be sold at $200 each. She has
already paid $2,000 to Computer Conventions, Inc., for
the booth rental for the two-day convention. Assume
there are no other costs. What profits will Mary make for
different quantities of units sold?
CHAPTER 3
Objective 2
Fixed costs
ANALYSIS:
=
$2,000 -----booth rental
Variable costs =
$120
Unit selling price =
$200
-----cost of the package
Mary can use CVP analysis to examine changes in

operating income as a result of selling different quantities
of software packages.
The only numbers that change in selling different
quantities of packages are: (1) total revenues and (2)
total variable costs.
CHAPTER 3
Objective 2
The difference between total revenues and total variable

costs is contribution margin. OR
Contribution margin = contribution margin per unit
number of
packages sold
The difference between the selling price and the variable

cost per unit is the contribution margin per unit.
Contribution margin per unit divided by the selling price is
what we call the contribution margin percentage.
CHAPTER 3
Objective 2
Contribution Income Statement for Different Quantities

for Do-All Software Packages Sold
Number of Packages Sold
0
25
40
Revenues at $200 per

package
$0
$200
$1,000
$5,00
0
$8,000
Variable costs at $120

per package
120
600
3,000
4,800
Contribution margin at
$80 per package
80
400
2,000
3,200
2,000
2,000
2,000
2,000
2,000
$(2,000)
$(1,920)
$(1,600)
$0
$1,200
Fixed costs
Operating income
Spreadsheets computation
CHAPTER 3
Objective 3
The Break-Even Point

The break-even point is that quantity of output where
total revenues equals total costs that is, where the
operating income is zero.
Why would managers

be interested in the
break-even point?
CHAPTER 3
Objective 3
USP = Unit selling price

Abbreviations used in the subsequent analysis:
UVC = Unit variable costs

UCM = Unit contribution margin (USP-UVC)
CM% = Contribution margin percentage (UCM/USP)
FC = Fixed costs
Q = Quantity of output units sold (and manufactured)
OI = Operating Income
TOI = Target operating income
TNI = Target net income
CHAPTER 3
Objective 3
1. Equation method:
Three methods for determining breakeven point
Revenues Variable costs Fixed Costs = Operating Income
(USP*Q) (UVC*Q) FC = OI
Provides the most general and easy-to-remember

approach to any CVP situation.
$200Q - $120Q -$2000 = $0
$80Q = $2000
Q = $2000/$80
Q = 25 units
CHAPTER 3
Objective 3
2. Contribution margin method:

It uses the concept of contribution margin to rework the
equation method.
(USP*Q) (UVC*Q) FC = OI
By rewriting,
(USP UVC) * Q = FC + OI
UCM*Q = FC + OI
Q = (FC +OI)/UCM
At break-even, OI=0, therefore:
Q = FC /UCM
Break-even no. of units = Fixed costs/Unit contribution
margin
CHAPTER 3
Objective 3
Substituting,
Break-even no. of units = Fixed costs/Unit contribution

margin
Break-even no. of units = $2000/$80 per unit = 25 units
Calculating break-even revenues,
Break-even in revenue dollars = Break-even no. of units X USP

= (FC*USP)/UCM
= FC/(UCM/USP)
Since, CM% = UCM/USP
= $80/$200 = 40%
= FC/CM%
= $2000/40%
Break-even in revenue dollars = $5000
CHAPTER 3
Objective 3
Cost-Volume-Profit Graph for Do-All Software

3. Graph method:
Operating
Income area
Break-even point
Operating Loss
area
CHAPTER 3
Objective 3
Profit-Volume Graph for Do-All Software

Target Operating Income
Operating
Income area
Break-even point
Operating Loss
area
CHAPTER 3
Objective 4
Target net income = (Target operating income) (Target operating

income X Tax rate)
Target Net Income and Income Taxes
Target net income = (Target operating income) (1- Tax rate)

Target operating income = Target net income / (1 Tax rate)
Substituting, (at tax rate of 40%)

Revenues Variable costs Fixed Costs = Target net income / (1 Tax rate)
$200Q - $120Q -$2000
= $1200/(1-0.40)
$200Q - $120Q -$2000
= $2000
Q
= $4000/$80
= 25 units
CHAPTER 3
Objective 5
Decision to Advertise
Using CVP for Making Decisions
Scenario:
Consider again the Do-All Software example. Suppose
Mary anticipates selling 40 packages. At this sales level,
Marys operating income would be $1200. Mary is
considering placing an advertisement describing the
product and its features in the convention brochure. The
advertisement will cost $500. This cost will be fixed
because it will stay the same regardless of the number of
units Mary sells. She anticipates that advertising will
increase sales to 45 packages. Should Mary advertise?
CHAPTER 3
Objective 5
Cost-Volume-Profit Analysis
40 Packages
Sold with No
Advertising
45 Packages
Sold with
Advertising
Difference
(1)
(2)
(3) = (2)-(1)
Contribution margin
($80 X 40; $80 X 45)
$3,200
$3,600
$400
Fixed costs
2,000
2,500
500
$1,100
$
(100)
Operating income
$1,200
Operating income decreases by $100, so Mary should

not advertise.
CHAPTER 3
Objective 5
Decision to Reduce Selling Price
Scenario:
Having decided not to advertise, Mary is contemplating
whether to reduce the selling price of Do-All Software to
$175. At this price she thinks sales will be 50 units. At
this quantity, the software wholesaler who supplies DoAll Software will sell the packages to Mary for $115 per
package instead of $120. Should Mary reduce the selling
price?
CHAPTER 3
Objective 5
Cost-Volume-Profit Analysis
Contribution margin from lowering price to $175,
($175-$115)*50 units
$3,000
Contribution margin from maintaining price to

$200, ($200-$120)*40 units
$3,200
Increase (Decrease) in contribution margin from

lowering price
$(200)
Because the fixed costs of $2000 do not change,

decreasing the price will lead to $200 lower contribution
margin and a $200 lower operating income
CHAPTER 3
Objective 5
Sensitivity Analysis and Uncertainty

Sensitivity analysis is a what if technique that managers
use to examine how a result will change if the original
predicted data are not achieved or if an underlying
assumption changes.
In the context of CVP analysis, sensitivity analysis answers
such questions as, What will operating income be if units
sold decreases by 5% from the original prediction? And will
operating income be if variable costs per unit increase by
10%?
The widespread use of electronic spreadsheets enables
managers to conduct CVP-based sensitivity analyses in a
systematic and efficient way.
CHAPTER 3
Objective 5
Revenues Required at $200 Selling Price to

Earn Operating Income of
Spreadsheet Analysis of CVP Relationships for Do-All Software
Fixed Costs
$2,000.00
2500
3000
Variable
Costs per
Unit
$0
$1,000
$1,500
$2,000
$100
$4,000
$6,000
$7,000
$8,000
120
5,000
7,500
8,750
10,000
140
6,667
10,000
11,667
13,333
100
5,000
7,000
8,000
9,000
120
6,250
8,750
10,000
11,250
140
8,333
11,667
13,333
15,000
100
6,000
8,000
9,000
10,000
120
7,500
10,000
11,250
12,500
140
10,000
13,333
15,000
16,667
CHAPTER 3
Objective 5
An aspect of sensitivity analysis is margin of safety, which is

the amount of budgeted revenues over and above
breakeven revenues.
If expressed in units, margin of safety is the sales quantity
minus the breakeven quantity.
The margin of safety answers the what if question: If
budgeted revenues are above breakeven and drop, how far
can they fall below budget before the breakeven point is
reached?
CHAPTER 3
Objective 5
Using the given data, for 40 units sold, the margin of safety
is $3000 revenues or 15 units if expressed in units
40 units:
budgeted revenues = $8000 ($200*40 units)
Breakeven (25 units):
revenues = $5000 ($200*25 units)
Therefore, margin of safety will be,

$3000 ($8000-$5000) (in terms of revenues)
15 units (40 units 25 units) (in terms of units)
CHAPTER 3
Objective 6
Alternative Fixed-Cost/Variable-Cost Structures

Cost Planning and CVP
CVP-based analysis highlights the risks and returns that an

existing cost structure holds for a organization. This insight
may lead managers to consider alternative cost structures.
CVP analysis can help managers evaluate various
alternatives.
CHAPTER 3
Objective 6
Scenario:
Consider again our Do-All Software example. Our
original example has Mary paying a $2000 booth rental
fee. Suppose, however, Computer Conventions offers
Mary three rental alternatives:
Option 1: $2000 fixed fee
Option 2: $800 fixed fee plus 15% of convention revenues
Option 3: 25% of convention revenues with no fixed fee
Mary anticipates selling 40 packages. She is interested

in how her choice of a rental agreement will affect the
income she earns and the risks she faces.
CHAPTER 3
Objective 6
Profit-Volume Graph for Alternative Rental Options for

Do-All Software
Breakeven
point = 16
Breakeven
point = 25
Breakeven
point
CHAPTER 3
Objective 6
If Mary sells 40 packages, each option results in operating

income of $1200.
However, if the sales of Mary vary from 40 units, CVP
analysis highlights the different risks and returns associated
with each option.
margin of safety:
option 1: revenues @ 40 units revenues @ 25 units = $8000-$5000 = $3000
option 2: revenues @ 40 units revenues @ 16 units = $8000-$3200 = $4800
option 3: revenues @ 40 units revenues @ 0 unit = $8000-$0 = $8000
the downside risk of option 1 comes from its higher fixed

cost and hence higher breakeven point and lower margin of
safety.
CHAPTER 3
Objective 6
If the units sold drops to 20, what would be the operating

income under each option?
..Option 1 leads to an operating loss of $400 but options 2 and 3 will
continue to produce operating income
However, the higher risk in option 1 must be evaluated

against its potential benefits
CHAPTER 3
Objective 6
Option 1 has the highest UCM because of its low VC. Once
FC are recovered at sales of 25 units, each additional unit
adds $80 of CM and OI per unit.
At sales 60 units:
Option 1 shows an OI of $2800, greater than the OI under
options 2 and 3.
By moving from option 1 to 3, Mary faces less risk when
demand is low both because of lower fixed costs and
because she losses less CM per unit.
CHAPTER 3
Objective 6
Risk-return trade off measure

Operating leverage describes the effects that FC have on
changes in OI as changes occur in units sold and hence in
CM.
High FC has high operating leverage
High operating leverage means small changes in sales will
lead to large changes in OI.
sales, OI increases relatively more
sales, OI decline relatively more, leading to a
greater risk in losses
Degree of operating leverage equals contribution margin

divided by the operating income. ( = CM/OI)
CHAPTER 3
Objective 6
Option 1
Degree of operating leverage at sales 40 units
Contribution margin per unit
Option 2
Option 3
$80
$50
$30
Contribution margin (CM)
$3,200
$2,000
$1,200
Operating income (OI)
$1,200
$1,200
$1,200
2.67
1.67
1.00
Degree of operating leverage

(CM/OI)
A sales increase in 50%

From 40 units to 60 units , CM will increase by 50%, then OI increase
will be 50% times the degree of operating leverage.
OI increase would then be,
Option 1: 2.67*50% = 133.5% (from $1200 to $2800)
Option 2: 1.67*50% = 83.5% (from $1200 to $2200)
Option 3: 1.00*50% = 50% (from $1200 to $1800)
CHAPTER 3
Objective 6
Effect of Time Horizon
A critical assumption of CVP analysis is that costs can be

classified either variable or fixed.
.This classification is affected by the time period being
considered for a decision.
.The shorter the time horizon, the higher
percentage of total costs we may view as fixed.
Example
the
CHAPTER 3
Objective 6
Scenario 1:
Suppose a United Airlines plane will depart from its gate in
60 minutes and there are 20 empty seats. A potential
passenger arrives bearing a transferable ticket from a
competing airline. What are the variable costs to United of
placing one more passenger in an otherwise empty seat?
.Variable costs (such as one meal) would be negligible.
Virtually, all the costs in this decision situation are fixed.
Scenario 2:
Suppose a United Airlines must decide whether to include
another city in its routes.
.....This decision may have a one-year planning horizon.
Many more costs would be regarded as variable and fewer
as fixed in this decision.
CHAPTER 3
Objective 7
Effects of Sales Mix on Income

Sales Mix is the relative combination of quantities of products
(or services) that constitutes total unit sales.
If the mix changes, the overall unit sales target may still be
achieved. However, the effect on operating income depends
on how the original proportions of lower or higher contribution
margin products have shifted.
CHAPTER 3
Objective 7
Influencing Cost Structures to Manage the RiskReturn Tradeoff

Building up too many fixed costs can be hazardous to a
companys health. Because fixed costs, unlike variable costs,
do not automatically decrease as volumes decline, companies
with too many fixed costs can lose a considerable amount of
money during lean months.
Managers decision influence the mix of fixed and variable
costs in a companys cost structure. In making these
decisions, managers use forecasts of the effect on net income
at different volume levels to evaluate the risk-return tradeoffs
involved in various cost structures.
CHAPTER 3
Objective 7
Example:
Xerox sells copier machines at lower margins along with
maintenance and supplies (for example, paper and toner)
contracts a higher margin.
Similarly, Gillette sells razors at low margins and counts on
high margins from selling blades. Cellular phone service
companies, also, give away the cellular phone instrument
itself in exchange for higher revenues from using the
network.
CHAPTER 3
Objective 7
Suppose Mary is now budgeting for the next convention.

She plans to sell two software products Do-All and
Superword and budgets the following:
Do-All
Variable costs,
$120 & $70 per unit
Unit contribution
margin (UCM), $80
and $30
Total
40
100
4,000
$ 16,000
2,800
10,000
1,200
6,000
60
Units Sold
Revenues, $200 &
$100 per unit
Superword
12,000
7,200
$
4,800
Fixed costs
Operating income
4,500
$
1,500
CHAPTER 3
Objective 7
What is the breakeven point?

One possible assumption is that the budgeted sales mix (3
units Do-All sold for every 2 units of Superword sold) will not
change at different levels of total unit sales.
Let
Then
3Ss = number of units of Do-All to breakeven

2S = number of units of Superword to breakeven
Revenues Variable costs Fixed costs = Operating income

[$200(3S) + $100(2S)] [$120(3S) + $70(2S)] - $4,500 =0
$300s = $4,500
S
= 15
No. of units of Do-All to breakeven = 3 x 15 = 45 units
No. of units of Superword to breakeven = 2 x 15 = 30 units
CHAPTER 3
Objective 7
Units Sold
Revenues, $200 &
$100 per unit
Variable costs, $120
& $70 per unit
Unit contribution
margin (UCM), $80
and $30
Fixed costs
Operating income
The breakeven point is 75 units when

the sales mix is 45 units of Do-All and
30 units of Superword, which maintains
the ratio of 3 units of Do-All for 2 units of
Superword.
At this mix, the total contribution margin
of $4,500 (Do-All $80 x 45 units =
$3,000 + Superword $30 x 30 = $900)
equals the fixed costs of $4,500.
CHAPTER 3
Objective 7
We can also calculate the breakeven point in revenues for the

multiple product situation using the weighted-average
contribution margin percentage.
Weighted-average
contribution margin
percentage
Total contribution margin

=
Total revenues
$6,000
=
$16,000
= 0.375 or 37.5%
CHAPTER 3
Objective 7
Total revenues
required to break even
Fixed costs
Weighted-average contribution
margin percentage
$4,500
0.375
= $12,000
CHAPTER 3
Objective 7
Units Sold
Revenues, $200 &
$100 per unit
Variable costs, $120
& $70 per unit
Unit contribution
margin (UCM), $80
and $30
Fixed costs
Operating income
The $16,000 of revenues are in the

ratio of 3:1 ($12,000 : $4,000) or 75%
:25%.
Hence
the
breakeven
revenues of $12,000 should be
apportioned in the ratio of 75% ;
25%. This amounts to breakeven
revenue dollars of $9,000 (75% x
$12,000) of Do-All and $3,000 (25%
x $12,000) of Superword. At a selling
price of $200 for Do-All and $100 for
Superword, this equals 45 units
($9,000 / $200) of Do-All and 30 units
($3,000 / $100) of Superword.
CHAPTER 3
Objective 7
CVP Analysis in Service and Non-Profit

Organizations
CVP can also be applied readily to decisions by
manufacturing , service, and nonprofit organizations . The
key to applying CVP analysis in service and nonprofit
organizations is measuring their output. Examples of output
measures in various service and nonprofit industries follow.
Industry
Measure of Output
Airlines
Passenger-miles
Hotels/motels
Room-nights occupied
Hospitals
Patient-days
Universities
Student-credit hours
CHAPTER 3
Objective 7
Consider a social welfare agency of the government with a

budget appropriation (revenue) for year 2000 of $900,000.
This nonprofit agencys major purpose is to assist
handicapped people who are seeking employment. On
average, the agency supplements each persons income
by $5,000 annually. The agencys fixed costs are
$270,000. It has no other costs. The agency manager
wants to know how many people could be assisted in
2000. We can use CVP analysis here by setting operating
income to zero. Let Q be the number handicapped people
to be assisted:
CHAPTER 3
Objective 7
Revenues Variable costs Fixed costs

= $0
$900,000 - $5,000Q - $270,000 = $0
$5,000Q
= $900,000 - $270,000
$5,000Q
= $630,000
Q
= $630,000 / $5,000 per person
Q
= 126 people
CHAPTER 3
Objective 7
Suppose the manager is concerned that the total budget

appropriation for 2001 will be reduced by 15% to a new
amount of $900,000 x (1 0.15) = $765,000. The manager
wants to know how many handicapped people could now be
assisted. Assume the same amount of monetary assistance
per person.
Revenues Variable costs Fixed costs

= $0
$765,000 - $5,000Q - $270,000 = $0
$5,000Q
= $765,000 - $270,000
$5,000Q
= $495,000
Q
= $495,000 / $5,000 per person
Q
= 99 people
CHAPTER 3
Objective 7
Note the following two characteristics of the CVP relationships

in this nonprofit situation:
1. The percentage drop in service, (126 99) / 126, or
21.4%, is more than the 15% reduction in the budget
appropriation. Why? Because the existence of $270,000
in fixed costs means that the percentage drop in service
exceeds the percentage drop in budget appropriation.
2. If the relationships were graphed, the budget
appropriation amount would be a straight horizontal line
of $765,000. The manager could adjust operations to
stay within this reduced appropriations in one or more
three basic ways: (a) Reduce the no. of people assisted,
(b) reduce the variable costs (the assistance per
person), or (c) reduce the total fixed costs.
CHAPTER 3
Objective 8
Multiple Cost Drivers
From the previous topics we have assumed that the

number of output units is the only revenue and cost
driver. In this section we relax this important
assumption and describe how some aspects of CVP
analysis can be adapted to the more general case of
multiple cost drivers.
CHAPTER 3
Objective 8
Let us consider again the single product Do-All Software

example. Suppose that Mary Will incur a variable cost of $10
for preparing documents and invoices associated with the
sale of Do-All Software. These documents and invoices will
need to be prepared for each customer that buys Do-All
Software. That is, the cost driver of document-and-invoicepreparation costs is the number of different customers that
buy Do-All Software. Marys operating income can then be
expressed as:
Operating
Income
= Revenues
- (Costs of
each DoAll
Software
package
X Number
of
packages
sold)
- (Cost of
preparing
each
document
and
invoice
X Number of
documents
and
invoices)
- Fixed
costs
CHAPTER 3
Objective 8
Assuming that Mary sells 40 packages to 15 customers, then :

Operating
income
= ($200x40) ($120x40) ($10x15) - $2,000

= $8,000 - $4,800 - $150 - $2,000
= $1,050
If instead Mary sells 40 packages to 40 customers, then:

Operating
income
= ($200x40) ($120x40) ($10x40) - $2,000

= $8,000 - $4,800 - $400 - $2,000
= $800
CHAPTER 3
Objective 8
Note that the number of packages sold is not the only

determinant of Marys operating income. For a given number
of packages sold, Marys operating income will be lower if
Mary sells Do-All Software to more customers. Marys cost
structure depends on two cost drivers the number of
packages sold and the number of customers.
There is no unique breakeven point when there are multiple
cost drivers, just as in the case of multiple products.
CHAPTER 3
Objective 9
Contribution Margin Versus Gross Margin
Gross Margin = Revenues Cost of goods sold

Contribution margin = Revenues All variable costs
CHAPTER 3
Objective 9
Merchandising Sector
Contribution margin is computed by deducting all variable costs
from revenues, whereas gross margin is computed by deducting
only cost of goods sold from revenues.
Contribution Income Statement
Emphasizing Contribution Margin
Revenues
Variable manufacturing costs
Variable non-manufacturing costs
Contribution margin
Fixed manufacturing costs
Fixed non-manufacturing costs
Operating income
$ 1,000
$ 120
43
163
37
$
19
18
CHAPTER 3
Objective 9
Merchandising Sector
Contribution margin is computed by deducting all variable
costs from revenues, whereas gross margin is computed by
deducting only cost of goods sold from revenues.
Financial Accounting Income Statement
Emphasizing Gross Margin
Revenues
Cost of goods sold
Gross margin
Operating costs ($43 + $19)
Operating income
$ 1,000
120
80
$
62
18
CHAPTER 3
Objective 9
Manufacturing Sector
The two areas of difference between contribution margin and
gross margin for companies in the manufacturing sector are
fixed manufacturing costs and variable non-manufacturing
costs.
Contribution Income Statement
Emphasizing Contribution Margin
Revenues
Variable manufacturing costs
Variable non-manufacturing costs
Contribution margin
Fixed manufacturing costs
Fixed non-manufacturing costs
Operating income
$ 1,000
$ 250
270
520
480
160
138
298
$ 182
CHAPTER 3
Objective 9
Manufacturing Sector
The two areas of difference between contribution margin and
gross margin for companies in the manufacturing sector are
fixed manufacturing costs and variable non-manufacturing
costs.
Financial Accounting Income Statement
Emphasizing Gross Margin
Revenues
Cost of goods sold ($250 + $160)
Gross margin
Non-manufacturing costs ($270 + $138)
Operating income
$ 1,000
410
590
408
$ 182
CHAPTER 3
Objective 9
Fixed manufacturing costs are not deducted from

revenues when computing contribution margin but
are deducted when computing gross margin. Cost of
goods sold in manufacturing company includes all
manufacturing costs. Variable non-manufacturing
costs are deducted from revenues when computing
contribution margin but are not deducted when
computing gross margin.
CHAPTER 3
End

Cvpanalysis 100114232949 Phpapp01

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Cvpanalysis 100114232949 Phpapp01

Загружено:

Авторское право:

Доступные форматы

CHAPTER 3

By: Horgren, C., Foster, G., and S. Datar

Ecleo, D., Ongy E., and A. Tulin

1. Understand basic cost-volume-profit (CVP) assumptions

Cost Accounting: A managerial emphasis

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

Cost-Volume-Profit Assumptions and

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

4. The unit selling price, unit variable costs, and fixed

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

Operating income = Total revenues

Cost of goods sold and

NET INCOME = operating income + nonoperating revenues (such

NET INCOME = Operating income Income taxes

Back to learning objectives

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

Essentials of Cost-Volume-Profit Analysis

Cost Accounting: A managerial emphasis

$2,000 -----booth rental

Unit selling price =

-----cost of the package

Mary can use CVP analysis to examine changes in

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

The difference between total revenues and total variable

The difference between the selling price and the variable

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

Contribution Income Statement for Different Quantities

Revenues at $200 per

Variable costs at $120

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

The Break-Even Point

Why would managers

USP = Unit selling price

Cost Accounting: A managerial emphasis

Abbreviations used in the subsequent analysis:

UVC = Unit variable costs

Cost Accounting: A managerial emphasis

Three methods for determining break- even point

Revenues Variable costs Fixed Costs = Operating Income

Provides the most general and easy-to-remember

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

2. Contribution margin method:

By: Horgren, C., Foster, G., and S. Datar

Cost Accounting: A managerial emphasis

Break-even no. of units = Fixed costs/Unit contribution

Break-even in revenue dollars = Break-even no. of units X USP

Break-even in revenue dollars = $5000

Cost-Volume-Profit Graph for Do-All Software

Cost Accounting: A managerial emphasis

Profit-Volume Graph for Do-All Software

Cost Accounting: A managerial emphasis

Target Operating Income

Back to learning objectives

Target net income = (Target operating income) (Target operating

Cost Accounting: A managerial emphasis