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
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•
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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
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
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
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
SU – 8.2 CVP Analysis – Basic
Calculations
• Problems
• 8, 9, 12 & 13 on page 330
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
SU – 8.4 CVP Analysis – Multiproduct
Calculations
• Multiple Products (or Services)
S = FC + VC
• Choice of Product decisions
• Special Orders
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
SU 8.6 Short-run Profit Maximization
• Pure Competition
• Monopoly
• Monopolistic Competition
• Oligopoly
Quiz questions