ACCT 2102 Chapter 3 Notes

ACCT 2102 Chapter 3 Notes - SR – VC = CM – FC = OPY If...

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Cost Volume Profit (CVP) Analysis (Chapter 3) How is a normal income statement arranged? o By function – how costs are used The “normal” income statement doesn’t really equip managers with the operating knowledge they need to make informed decisions o Managers need to know “ cost behavior ” to make informed decisions DM and DL = variable costs Salaries, rent, and depreciation = fixed costs Contribution Margin (CM) Income Statement
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Unformatted text preview: SR – VC = CM – FC = OPY If CM = FC; breakeven point Calculating Units SR = (SP)(# of units sold) VC = (VC/unit)(# of units) CM = (CM/unit)(# of units) # of units = (FC +OPY)/(CM/unit) Sales dollars go first to VC (1/2), then FC (1/4), then OPY (1/4) The portion of your sales dollar that goes to cover variable cost is called “variable cost ratio” (VC)/(SR) or (unit VC)/(SP) VC% + CM% = 100% CM% = CM/SR...
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