COMM 305 Chapter Notes - Chapter 6: Earnings Before Interest And Taxes, Contribution Margin, Operating Margin
7 Apr 2017
School
Department
Course
Professor
Document Summary
Cost-volume-profit (cvp) analysis is the study of the effects that changes in costs & volume have on a company"s profits. It"s also critical for management to make decisions concerning: Cvp analysis considers the interrelationships between the following components: Inventory levels remain constant all units that are produced are sold: when more than 1 type of product is sold, the sales mix will remain constant. That is, the percentage of total sales that each product represents will stay the same. The sales mix complicates cvp analysis because different products will have different cost relationships. **we"ll start by assuming a single product is being sold in this chapter, the address sales mix issues. When these 5 assumptions are not valid, the results of cvp analysis may be inaccurate. Management usually wants the information reported in a cvp in an income statement format because of its importance for decision-making.
