COMM 305 Lecture Notes - Lecture 6: Contribution Margin, Income Statement, Variable Cost
4 Dec 2018
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Document Summary
Study of the effects of changes of costs and volume on a company"s pro ts. Considers the interrelationships among the ve components of cvp analysis. Costs and revenues behaviour is linear throughout the relevant range of activity index. Costs can be classi ed as either variable or xed with reasonable accuracy. Changes in activity are the only factors that affect costs. Inventory levels remain constant - all units produced are sold. When more than one type of product is sold, the sales mix will remain constant. Classi es costs and expenses as xed or variable. Reports contribution margin in the body of the statement (contribution margin is the amount of revenue remaining after deducting variable costs. Reports the same income as traditional income statement. Contribution margin is available to cover xed costs and to contribute to income. Formula for contribution margin per unit: unit selling price - unit variable costs = contribution margin per unit.
