BU247 Lecture Notes - Lecture 3: Cost Driver, Fixed Cost, Management Accounting
Document Summary
Cost information is pervasive throughout decision-making situations: pricing, product planning, budgeting, performance evaluation, contracting. Cvp uses variable and fixed costs to identify the profit generated at various levels of activity total variable costs. Contribution margin is the difference between total revenue and. Contribution margin per unit is the contribution each unit makes to covering fixed costs and providing a profit. Contribution margin ratio is the ratio of contribution margin per unit to selling price per unit. The cvp equation: profit = revenue total costs. Revenue variable costs -fixed costs (units sold x revenue per unit) (units sold x. Variable cost per unit)- fixed costs (units sold x [revenue per unit variable cost per unit])- fixed costs (units sold x contribution margin per unit)- fixed costs. Variations of cvp equation: to calculate sales needed to achieve target profit: Required unit sales = (target profit + fixed cost)/ Contribution margin per unit: impact of income taxes.
