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

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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


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