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C3_post - Review 1 Chapter 1 emphasized costs that are part...

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Review Review 1. 1. Chapter 1 emphasized  Chapter 1 emphasized  costs that are part of  costs that are part of  inventory inventory  (product costs) vs.   (product costs) vs.  costs that are  costs that are  not part of your product not part of your product  (period costs).  (period costs). 1. 1. Chapter 2 emphasized  Chapter 2 emphasized  cost behavior cost behavior     (predicting how costs will change). (predicting how costs will change).

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\$- \$20,000 \$40,000 \$60,000 \$80,000 \$100,000 \$120,000 \$140,000 \$160,000 0.0 5.0 10.0 15.0 20.0 25.0 30.0 total miles (000s) total cost Chapter 2…
Activity Total Cost X Y just like high school algebra y = mx + b Fixed Costs = the intercept . Variable Costs = the slope

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Cost Behavior: Chp. 2 Units Sold Total Cost
Chp 3: Cost-Volume-Profit Graph Units Sold Dollars Profit area Loss area Revenue Line

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Cost-Volume-Profit Graph Units Sold Dollars Profit area Loss area “Break-even” Point
Determining the Break-even Point The break-even point is the point where  total revenue equals total costs total revenue equals total costs  (both  variable and fixed).  The textbook starts with this formula: Break-even Break-even volume in units volume in units = = Fixed costs Fixed costs Contribution margin per unit Contribution margin per unit

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Reaching a Target Profit Level The formula is easily extended…instead of earning “zero  profit” (i.e., breakeven), many companies have a profit  goal in mind… Break-even Break-even volume in units volume in units = = Fixed costs +  Fixed costs +  Desired profit Desired profit     Contribution margin per unit Contribution margin per unit
Reading the Graph Units Sold Dollars Profit area Loss area

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This note was uploaded on 04/22/2008 for the course ACCT 2302 taught by Professor All during the Spring '08 term at Texas Tech.

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C3_post - Review 1 Chapter 1 emphasized costs that are part...

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