ACCT101-Handout14

ACCT101-Handout14 - Acct 101 L12, L13, L16 Handout #14...

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Acct 101 L12, L13, L16 Handout #14 1 Cost-Volume-Profit Analysis Identifying cost behavior: predict how changes in costs and sales levels affect income. Fixed costs. Also see: Step-wise costs. Variable costs. Also see: Curvilinear costs. Mixed costs. Measuring cost behavior Scatter diagrams: drawn with a line that best fits the points visually . a. Intersection point of line on cost axis is at fixed cost amount. b. The variable cost per unit of volume equals the slope of the line. c. Cost equation: Fixed cost plus (variable cost per unit times number of units of volume). d. Subject to interpretation. High-low method: graphically connecting the two cost amounts at the highest and lowest unit volumes. Ignores all cost points except the highest and lowest resulting in less precision. Least-squares regression: statistical method of identifying cost behavior. Break-even analysis Assumptions of CVP Analysis a. Constant selling price per unit b. Constant variable costs per unit
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This note was uploaded on 12/07/2009 for the course ACCT ACCT 101 taught by Professor H during the Fall '08 term at HKUST.

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ACCT101-Handout14 - Acct 101 L12, L13, L16 Handout #14...

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