# AA025 Topic 4 Student's Note.docx - AA025: CHAPTER 4...

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AA025: CHAPTER 42020/2021KOLEJ MATRIKULASI LABUANACCOUNTING 2: AA025Topic 4: Cost Volume Profit Analysis (CVP)4.1 Definition and importance of CVP analysis(a)Define and explain the importance of CVP analysis(a)Define and explain the importance of CVP analysis.4.2 Assumptions in CVP analysis(a)Explain the assumptions used in CVP analysis.4.3 CVP analysis method(a) Describe CVP analysis in determining the break-even point (BEP) and theforecasted sales.(b) Calculate using mathematical equation method and contribution marginmethod4.4 Margin of safety(a) Explain and calculate margin of safety in ringgit, unit and percentage.4.5 Sensitivity analysis(a) Explain the effects of changes in selling price, fixed costs and or variablecosts on CVP through calculationDefinition:Cost Volume Profit Analysis examinesbehavior of total revenues, total costs & operatingincome as changes occur in the output level, the selling price, the variable cost per unitor the fixed cost of a product.Importance OfCost Volum Profit Analysis1.Determine sales level at Break-Even Point.2.Determine the sales required to achieve profit target.3.Make decisions regarding pricing policies.4.Make decisions regarding fixed costs and marketing strategies.5.Review the impact on profit when there is a change in the CVP analysis element.4.2 Assumptions in CVP analysis1 |P a g eLearning Outcomes4.1 Definition and importance of CVP analysis
AA025: CHAPTER 42020/2021

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