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

AA025: CHAPTER 4 2020/202
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KOLEJ MATRIKULASI LABUAN
ACCOUNTING 2: AA025
Topic 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 the
forecasted sales.
(b) Calculate using mathematical equation method and contribution margin
method
4.4 Margin of safety
(a) Explain and calculate margin of safety in ringg it, unit and percentage.
4.5 Sensitivity analysis
(a) Explain the effects of changes in selling price, fixed costs and or variable
costs on CVP through calculation
Definition:
Cost Volume Profit Analysis examines behavior of total revenues, total costs & operating
income as changes occur in the output level, the selling price, the variable cost per unit
or the fixed cost of a product.
Importance Of Cost Volum Profit Analysis
1. 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 analysis
1 | P a g e
Learning Outcomes
4.1 Definition and importance of CVP analysis

AA025: CHAPTER 4 2020/202
1