Chapter 7 Pre Class notes

Chapter 7 Pre Class notes - 7-1MANAGERIAL...

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Unformatted text preview: 7-1MANAGERIAL ACCOUNTINGRSM222Cost-Volume-Profit RelationshipsChapter 77-2Cost-Volume-Profit Relationship InteractionsCost-volume-profit (CVP) analysis is a powerful tool that managers use to help them understand the interrelationship among cost, volume and profit in an organization by focusing on interactions among the following five elements:1.prices of products2.volume or level of activity3.per unit variable costs4.total fixed costs5.mix of products soldLO 17-3Cost-Volume-Profit RelationshipRevenue (Fixed Costs + Variable Costs) = Profit p*Q = f + v*Q + NI; p Price; Q units sold; v unit variable cost; f total fixed cost; NI profit. 7-4Basics of Cost-Volume-Profit AnalysisContribution Margin (CM) is the amount ________from sales revenue after ________ expenses have been deducted.Contribution Margin (CM) is the amount ________from sales revenue after ________ expenses have been deducted.Sales (500 bicycles)250,000$ Less: Variable expenses150,000Contribution margin100,000Less: Fixed expenses80,000Net operating income20,000$ Racing Bicycle CompanyContribution Income StatementFor the Month of JuneThe contribution income statement is helpful to managers in judging the impact on profits of changes in selling price, cost, or volume. The emphasis is on cost behaviour.The contribution income statement is helpful to managers in judging the impact on profits of changes in selling price, cost, or volume. The emphasis is on cost behaviour.LO 17-5Contribution Margin (CM)TotalPer UnitCM RatioSales (500 bicycles)250,000$ 500$ 100%Less: Variable expenses150,00030060%Contribution margin100,000200$ 40%Less: Fixed expenses80,000Net operating income20,000$ Racing Bicycle CompanyContribution Income StatementFor the Month of JuneSales, variable expenses, and contribution margin can also...
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This note was uploaded on 04/03/2012 for the course RSM 222 taught by Professor D.cianflone during the Spring '10 term at University of Toronto- Toronto.

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Chapter 7 Pre Class notes - 7-1MANAGERIAL...

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