250_Notes_7B

250_Notes_7B - ACCT 250 – ACCOUNTING FOR DECISION MAKING...

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ACCT 250 – ACCOUNTING FOR DECISION MAKING NOTES – CHAPTER 7B SPRING 2008 SUMMARY Here we extend basic CVP analysis to a few additional concepts: multiple product situations, activity-based costing, margin of safety, and operating leverage. NOTES 1) Multiple products Basic CVP assumes just one product, not a very realistic assumption Use contribution margin methods when multiple products are involved Key is to calculate the weighted average CM and/or CM% P7-38 on page 243 End of Notes 2) ABC In an ABC environment, we have four types of cost drivers: o The challenge is identifying which of these are fixed vs. variable The variability of all costs must be considered when performing CVP P7-44 on page 245 End of notes 5195174.doc PAGE 1 OF 6
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ACCT 250 – ACCOUNTING FOR DECISION MAKING NOTES – CHAPTER 7B SPRING 2008 Margin of Safety Simply the difference, in terms of sales $ or units, between expected sales and
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250_Notes_7B - ACCT 250 – ACCOUNTING FOR DECISION MAKING...

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