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Study Unit 8

Study Unit 8. CVP Analysis and Marginal Analsyis. 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 expenses It allows us to study the effects of changes in Sales volume Sales price

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Study Unit 8

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  1. Study Unit 8 CVP Analysis and Marginal Analsyis

  2. 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 expenses • It allows us to study the effects of changes in • Sales volume • Sales price • Product mixes • What else……? • CVP analysis is done with what assumptions? • What is the break-even point and where is it on a graph? Continue

  3. SU- 8.1 – Cost-Volume-Profit (CVP) Analysis - Theory • Other terms and def. • Margin of safety • Mixed costs • Revenue or sales mix • Sensitivity analysis • Unit Contribution Margin (UCM) Continued

  4. SU- 8.1 – Cost-Volume-Profit (CVP) Analysis - Theory • Break-even point in units Fixed costs UCM • Break-even point in dollars Fixed costs CMR

  5. SU- 8.1 – Cost-Volume-Profit (CVP) Analysis - Theory • Review of questions: • 1 – Diff. gross margin and contribution margin • 5 – Effect of an increase in CM • 6 – Effects on BEP by changes in CM

  6. SU – 8.2 CVP Analysis – Basic Calculations • Problems • 8, 9, 12 & 13 on page 330

  7. SU – 8.3 CVP Analysis – Target Income Calculations • Target Operating Income Fixed costs + Target operating income UCM • Target Net Income Fixed costs + Target net income / (1.0 – tax rate) UCM • Problem 15, 16 and 18 on page 333

  8. SU – 8.4 CVP Analysis – Multiproduct Calculations • Multiple Products (or Services) S = FC + VC • Choice of Product decisions • Special Orders

  9. SU 8.5 – Marginal Analysis • Accounting Costs vs. Economic Costs • Explicit vs. Implicit Costs • Accounting vs. Economic Profit • Marginal Revenue and Marginal Cost • Profit Maximization • Short-Run Cost Relationship

  10. SU 8.6 Short-run Profit Maximization • Pure Competition • Monopoly • Monopolistic Competition • Oligopoly Quiz questions

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