Cot-Volume-Profit Anali Chapter Introduction 11-1 Cost Behavior 11-1a Variable Costs 11-1b Fixed Costs 11-1c Mixed Costs 11-1d Summary of Cost Behavior Concepts 11-2 Cost-Volume-Profit Relationships 11-2a Contribution Margin 11-2b Contribution Margin Ratio 11-2c Unit Contribution Margin 11-3 Mathematical Approach to Cost-Volume-Profit Analysis 11-3a Break-Even Point 11-3b Target Profit 11-4 Graphic Approach to Cost-Volume-Profit Analysis 11-4a Cost-Volume-Profit (Break-Even) Chart 11-4b
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thousand of dollars)= Fixed cost/contribution margin ratio | $7,287.03 | $7,620.20 | $11,655.34 | Break-even point in units (sale ticket)= Break-even point in dollar/Sales per tickets | 4535 | 5000 | 7506 | Margin of Safety= (Budgeted sales - Break-even point sales)/Budgeted sales | 15.10% | 5.95% | -8.82% | (Table 1. All the related data can be found in exhibit a.) Both the break-even point in dollars and the break-even point in units increase a lot, and the margin of safety drops down to negative
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defined geographical limits. Airwide International is envisioning three-year business plan and improving contribution margin from 38 percent to 40 percent has been one of the key goals. Not addressing the issue with Italy market, which is the largest in the western region of Europe, might be catastrophic to their 3 year plan. Analysis: Airwide International wants to increase their contribution margin in the next three year by 2
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Cost of goods manufactured Cost of Goods Sold Finished goods inventory, beginning + Cost of goods manufactured = Cost of goods available for sale - Finished goods inventory, ending = Cost of goods sold Sales - Cost of goods sold = Gross Margin Predetermined Overhead Rate Estimated manufacturing overhead/Estimated machine hours= $ per machine hour Calculate applied overhead Actual machine hours X $ per machine hour = applied overhead Journal entry for the application of overhead
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Chapter Three 3 Fundamentals of Cost-Volume-Profit Analysis Orientation P A R T 1 LEARNING OBJECTIVES Preparing and Organizing Yourself After reading this chapter, you should be able to: for Success in College L.O.1 Use cost-volume-profit (CVP) analysis to analyze decisions. L.O.2 Understand the effect of cost structure on decisions. L.O.3 Use Microsoft Excel to perform CVP analysis. L.O.4 Incorporate taxes, multiple products, and alternative cost structures into the CVP analysis. L.O.5 Understand
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Exercise 5-11: B/E Analysis; Target Profit; Margin of Safety; C/M Ratio Given: Pringle Company distributes a single product. The company's sales and expenses for a recent month were Total Per Unit Sales $600,000 $40 Variable expenses 420,000 $28 Contribution margin $180,000 $12 Fixed expenses 150,000 Net operating income $30,000 Required: 1. What is the monthly break-even point
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items. Finding the breakeven point for each item would be laborious and meaningless. 7-3 The contribution margin ratio is: price - variable costs price The contribution margin ratio (CMR) represents the net contribution per sales dollar. The CMR tells us the change in profit associated with a given change in sales dollars. It is a useful measure of the relative contribution to profit of different products, divisions, or sales units. The use of this ratio can give a retail
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(e) sales mix.5. Indicate what contribution margin is and how it can be expressed. Contribution marginis the amount of revenue remaining after deducting variable costs. It can be expressed as aper unit amount or as a ratio.6. Identify the three ways to determine the break-even point. The break-even point can be(a) computed from a mathematical equation, (b) computed by using a contribution margintechnique, and (c) derived from a CVP graph.7. Define margin of safety and give the formulas
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What is CVP? CVP or Cost Volume Profit analysis is an extremely interesting subject and one of the most useful for helping managers with short-term planning and decision making. This is because CVP analysis emphasizes the interrelationships of costs, quantity sold and price, it brings together all the financial information of the firm. CVP helps the managers understand the relationship between cost, volume and profit in organization by focusing on interactions among the following five elements:
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level of activity * Per unit variable costs * Total fixed costs * Mixed of products sold The contribution format * Total unit CM Ratio * Sales (400 speakers) $100,000 $50 100% * Less: variable costs 60,000 30 60% * Contribution margin 40,000 20 40% * Less: fixed Costs 30,000 * Net operating income 10,000 * Contribution margin – amount remaining from sales after variable expenses been deducted * CM Ratio – divide total CM by total
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