1 Predicting Cost Behaviour
how cost will respond to changes
in
the level of activity
3 fixed lost
4
5
in rease when
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in rage
Variable lost
2
Mixed lost
Mixed cost
same
the
stay
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High
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a
low method
cost
Kagan
Lecture example
when
Q F
Relevant Range
Contribution margin
CM
Profit
Revenues
Sales
Why analyze
total volume
VC
VC
FC
CM
to calculate at what
FC will be covered
volume Q
that
D Unit
Contribution Margin
P
Profit
To
increase
Profit
88
VC x Q FC
profit
p
4
Vo
W
contribution Margin
x
FC
t
Q
A
Ratio
CMR
Contribuggestargin
The company should increase marketing efforts
on products with the highest CMR
Profit
Revenue
VC
Contribution
margin
FC
Contribution margin
revenues
FC
a revenue
CMR x revenues FC
FL
Break even Analysis
2 equations we just learned
1 Profit
Unit CM x Q
Profit
CMR x raven
2
My ftp.EEEJ
UMR X Q
CM R x Rev
At FC
Revenue't
FC
Fc
Etathoon
I
FC
D
O
FC O
UM R
FY LMP
Breakeven point in units
t
BE point
in
Lecture slides example
10 2 1
M
FL
6
0.5 0.5
250,000
6
1,800,000
3514401435kt look4200kt350k
76 ok
Operating
BE unit
BE point
income
760 6
1.5m 7604274
126,666
1,266.661
K
MR
o
f
2
5M 7 1266667
BE sales
Current sales
2.5
A
1
41
491
operating leverage
to
YI
OI
how sensitive
changes
is
in sales
1574 2.03
024203
Itsule410
Target profit
scenario
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throtit
Im
1
7601
Ifl
2931333
2933333
Lecture example
Vc
VC
4
4
f
profit
2
250K
Q
original
new Q
76 ok
275k
p
co
P
9