7-GrC421_ControlAnalysis

7-GrC421_ControlAnalysis - California Polytechnic State...

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1 ment for Print and Digital Media ersity Organizational Control Analysis GrC 421 Production Managem California Polytechnic State Unive Cost Volume Analysis Cost Volume Analysis : Focuses on relations between cost, revenue, and volume of output Identify all costs related to production of a product 1. FIXED COSTS (FC) – do not vary with changes in volume for the period of analysis A. Examples of fixed costs: Rent/lease payments (equipment or space - Rent/lease payments (equipment or space) - Interest or mortgage payments (equipment or space) - Property taxes (fixed yearly payment) - Insurance (fire, theft, damage, liability) - Depreciation – an accounting charge designed to compensate (or repay) an organization for purchase of a long-term asset - Administration Salaries - General office staff - Utilities (budgeted: garbage, H20, electric, gas) ent for Print and Digital Media Cost Volume Analysis Identify all costs related to production of a product 1. FIXED COSTS (FC) Example Rent $2,500.00/mo Equipment $13,200.00/mo Insurance $300.00/mo Depreciation $1,000.00/mo Salaries $10,000.00/mo Office Expenses $4,000.00.mo Utilities $1,000.00.mo Total $32,000.00/mo or $384,000.00 annually Cost Volume Analysis 2. VARIABLE COSTS (VC) –vary in proportion to changes associated with volume for the period of analysis A. Examples of variable costs: - Raw materials and supplies (ink, paper, plates, chemicals, rollers, toner, etc.) - Labor (hourly wage) - Sales commissions (% of sale) - Utilities (for running equipment) - Taxes (payroll, sales, income) 3. REVENUE (TR) = Total Revenue: amount of sales generated from the production and sales of a product - TR = No. of units sold x Price/unit - Ex: 1000 copies @.05 = $50.00 revenue Terms Total Costs (TC) Quantity (Q) = vol or output Fixed Costs (FC) Variable Cost/unit (V) Variable Costs (VC) Revenue/unit (R) Profit (P) Total Revenue (TR) VC = V x Q TC = FC + VC TC FC + VC TR = R x Q Break Even Point Break-even Point (BEP) is the total volume of output at which total cost and total revenue are equal.
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This note was uploaded on 12/05/2011 for the course GRC 421 taught by Professor Dougspeer during the Fall '11 term at Cal Poly.

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7-GrC421_ControlAnalysis - California Polytechnic State...

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