Study Unit 8CVP 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 costsUCM

• Break-even point in dollars

Fixed costsCMR

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 incomeUCM

• 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