Management and Organizational Studies 3370A/B Chapter 4: Cost Volume Profit Relationships
29 Nov 2017
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Chapter 4 cost volume-profit relationships: cvp focuses on how profits are affected by the following five elements, price of products, volume or level of activity, per unit variable costs, total fixed costs, mix of products sold. Contribution margin: contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. Contribution margin ratio: contribution margin ratio the contribution margin as a percentage of total sales (cid:1842)(cid:1870)(cid:1867)(cid:1858)(cid:1872)=(cid:1847)(cid:1866)(cid:1872) (cid:1829) (cid:1843) (cid:1876)(cid:1857)(cid:1856) (cid:1857)(cid:1876)(cid:1868)(cid:1857)(cid:1866)(cid:1871)(cid:1857)(cid:1871) (cid:1829) (cid:1870)(cid:1853)(cid:1872)(cid:1867)=(cid:4666)(cid:1855)(cid:1867)(cid:1866)(cid:1872)(cid:1870)(cid:1854)(cid:1873)(cid:1872)(cid:1867)(cid:1866) (cid:1865)(cid:1853)(cid:1870)(cid:1859)(cid:1866)(cid:4667) (cid:1848)(cid:1853)(cid:1870)(cid:1853)(cid:1854)(cid:1864)(cid:1857) (cid:1857)(cid:1876)(cid:1868)(cid:1857)(cid:1866)(cid:1871)(cid:1857) (cid:1870)(cid:1853)(cid:1872)(cid:1867)=(cid:4666)(cid:1874)(cid:1853)(cid:1870)(cid:1853)(cid:1854)(cid:1864)(cid:1857) (cid:1857)(cid:1876)(cid:1868)(cid:1857)(cid:1866)(cid:1871)(cid:1857)(cid:1871)(cid:4667) (cid:1871)(cid:1853)(cid:1864)(cid:1857)(cid:1871) (cid:1871)(cid:1853)(cid:1864)(cid:1857)(cid:1871) Application of cvp concepts: variable expense ratio the ratio of variable expenses to sales, incremental analysis, determining difference between alternatives. Breakeven analysis: designed to answer questions such as how far sales could drop before the company begins to lose money. Margin of safety: margin of safety the excess of actual sales over the breakeven sales, the higher the margin of safety, the lower the risk of not breaking even.
