Chapter_8 - Chapter 8: Cost analysis and decision-making o...

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Chapter 8: Cost analysis and decision-making o Cost/Volume/profit relationship and break-even analysis o Limitation of CVP analysis o Multiple product break-even analysis o The scope of decision-making o The decision making process o Relevant costs o Shut-down or continuation decisions o Make versus buy o Product mix decision and limiting points
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Cost/volume/profit (CVP) analysis may be used to determine the break-even position of a business to provide sensitivity analyses on the impact on the business of changes to any of the variables used to calculate break-even. the break-even point is the level of activity at which there is neither profit nor loss Cost/Volume/Profit (CVP) Relationships And Break-Even Analysis (1) Cost/Volume/Profit (CVP) Relationships And Break-Even Analysis (1)
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There are three fundamental cost/revenue relationships that form the basis of CVP analysis total costs = variable costs + fixed costs contribution = total revenue - variable costs profit (or operating income) = total revenue - total costs the slopes of the total cost lines in the following two charts represent the unit variable costs Cost/Volume/Profit (CVP) Relationships And Break-Even Analysis (2) Cost/Volume/Profit (CVP) Relationships And Break-Even Analysis (2)
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Break-Even Chart – Low Fixed Costs, High Variable Costs Break-Even Chart – Low Fixed Costs, High Variable Costs
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Break-Even Chart – High Fixed Costs, Low Variable Costs Break-Even Chart – High Fixed Costs, Low Variable Costs
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Contribution Break-Even Chart Contribution Break-Even Chart
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Profit Volume (PV) Chart Profit Volume (PV) Chart
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This note was uploaded on 09/14/2010 for the course ACCOUNTING 311 taught by Professor Peter during the Summer '10 term at St. Louis CC.

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Chapter_8 - Chapter 8: Cost analysis and decision-making o...

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