cornerstones chp 3

# cornerstones chp 3 - Chapter 3 Cost-Volume-Profit Analysis...

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May 26, 2011 Accounting 2102 1 Chapter 3 Cost-Volume-Profit Analysis: A Managerial Planning Tool

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the income statement . . . How is a “normal” income statement arranged? The “normal” income statement doesn’t really equip managers with the operating knowledge they need to make informed decisions. What do you think a manager would need to make informed decisions? (hint: we talked about it in the last chapter ) May 26, 2011 Accounting 2102 2
Contribution Margin Income Statement Contribution Margin Income Statement May 26, 2011 Accounting 2102 3 Sales Revenue (total variable expenses) Contribution Margin (total fixed expenses) Operating income What does the Contribution Margin Contribution Margin tell us? 1. 2. Why would this information be important to a manager?

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Calculating Break Even in let’s start with an equation we already know . . . Sales Revenue – Expenses = Operating Income May 26, 2011 Accounting 2102 4
Calculating Break Even in May 26, 2011 Accounting 2102 5 Where do our sales dollars go? Variable Cost Ratio Contribution Margin Ratio If we already calculated BE in units, is there another way to calculate BE in sales revenue?

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we just want to break even? Modify the two equations we just learned to account for target profit . . . Break Even in Units
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cornerstones chp 3 - Chapter 3 Cost-Volume-Profit Analysis...

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