Study Unit 8

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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

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
• 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