ACC212Chap22

ACC212Chap22 - Chapter 22 C-V-P ANALYSIS This chapter deals...

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1 Chapter 22 C-V-P ANALYSIS This chapter deals with "cost-volume-profit" relationships. The concepts discussed in this chapter are very powerful and have application in marketing, economics, finance, management as well as accounting courses. What we are discussing here is basically how a firm's cost structure and sales or production volume affects profit ability. To understand the concepts in this chapter, you will need a solid understanding of cost behavior --- how specific costs respond to changes in the level of activity of a firm. There are three basic types of costs: 1. variable costs 2. fixed costs 3. mixed costs Explanations: a. variable costs --- these are costs that remain constant on a per unit basis but increase in total over the relevant range of production and in the short term EX: DM, DL, VOH, sales commissions b. fixed costs --- these are costs that decline on a per unit basis but remain unchanged 1
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2 in total over the relevant range of production and in the short term EX: rent expense, depreciation expense (most forms), property taxes, insurance expense, supervisory salaries c . mixed costs --- these are costs that contain both a fixed cost element and a variable cost element over the relevant range and in the short term EX: your telephone bill, percentage rents in the mall FOR OUR PURPOSES HERE, THE FIXED PORTION OF MIXED COSTS WILL BE CLASSIFIED AS A FIXED COST WHILE THE VARIABLE PORTION OF
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This note was uploaded on 04/07/2008 for the course ACC ACC212 taught by Professor Prescott during the Spring '08 term at S. Alabama.

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ACC212Chap22 - Chapter 22 C-V-P ANALYSIS This chapter deals...

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