Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
Cost-Volume-Profit Analysis • Break Even • Units • Dollars of Sales • Target Income • Units • Sales
Cost-Volume-Profit Analysis • Multiple Products • Assume constant sales mix • CMU for each product • Then calculate break even based on sales mix • Apples CMU $1; Oranges CMU $.50 • Fixed costs: $100 • Sales mix: 40% apples, 60% oranges • Breakeven units?
Cost-Volume-Profit Analysis • Evaluating alternatives • Increase in CM – Increase in Fixed Costs • Margin of safety • Sales – breakeven sales • Can be in units or dollars • Assume constant sales mix
Cost-Volume-Profit Analysis • Operating leverage = CM/Operating Income • Cost structure: variable versus fixed costs • Higher fixed costs = more risk • Higher fixed costs better = lower variable costs • Higher fixed costs better = higher CMU • Higher CMU = greater increase in income for each increase in units sold