Study Guide Chapter 21.docx - Cost-Volume-Profit Analysis Study Guide Do You Know\u2026 Learning Objective 1 Classify costs as variable costs fixed costs

Study Guide Chapter 21.docx - Cost-Volume-Profit Analysis...

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Cost-Volume-Profit Analysis Study Guide Do You Know…? Learning Objective 1: Classify costs as variable costs, fixed costs, or mixed costs. The characteristics of variable costs, fixed costs, and mixed costs? (See exercises 1–3) How to use the high-low method to determine the fixed and variable costs? (See exercises 4–6) Learning Objective 2: Compute the contribution margin, the contribution margin ratio, and the unit contribution margin. How to calculate the contribution margin, contribution margin ratio, and unit contribution margin? (See exercises 7–9) How to determine the impact on income from operations using the contribution margin ratio and unit contribution margin? (See exercises 10–12) Learning Objective 3: Determine the break-even point and sales necessary to achieve a target profit. How to calculate the break-even sales point in dollars and units? (See exercises 13–15) The effect of changes in fixed costs, unit selling price, and unit variable costs on the break-even point? (See exercises 16–18) The sales in dollars and units needed to achieve a target profit? (See exercises 19–21) Learning Objective 4: Using a cost-volume-profit chart and a profit-volume chart, determine the break-even point and sales necessary to achieve a target profit. How to prepare and interpret a cost-volume-profit chart? (See exercises 22, 24, and 26) How to prepare and interpret a profit-volume chart? (See exercises 23, 25, and 27)
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Learning Objective 5: Compute the break-even point for a company selling more than one product, the operating leverage, and the margin of safety. How to determine the break-even point if more than one product is sold? (See exercises 28–30) How to calculate and interpret operating leverage? (See exercises 31–33) How to calculate the margin of safety in dollars, units, and percent of current sales? (See exercises 34–36) Fill-in-the-Blank Equations 1. = Difference in total cost/Difference in units produced (under the high-low method) 2. = Total costs – (Variable cost per unit × Units produced) (under the high- low method) 3. Contribution margin = Sales – 4. Contribution margin ratio = /Sales 5. Change in income from operations = × Contribution margin ratio 6. = Sales price per unit – Variable cost per unit 7. Change in income from operations = × Unit contribution margin 8. = Fixed costs/Unit contribution margin 9. Break-even sales (dollars) = Fixed costs/ 10. Sales (units) = ( + Target profit)/Unit contribution margin 11. Sales (dollars) = (Fixed costs + Target profit)/ 12. Operating leverage = Contribution margin/ 13. = Percent change in sales × Operating leverage 14. Margin of safety (percent of current sales) = (Sales – Sales at break-even point)/ 15. Margin of safety (dollars) = Sales (dollars) – 16. Margin of safety (units) = – Break-even sales (units)
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2004006008001000 0 0 A B C 2000 1500 1000 500 Exercises 1. Determine if each of the following would be considered a fixed cost, variable cost, or mixed cost.
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