Chapter 3: Cost-Volume-Profit (CVP) Analysis
Cost-volume profit (CVP) analysis: a technique that examines changes in profits in response to
changes in sales volumes, costs, and prices
- Often perform CVP analysis to plan future levels of operating activit
Relevant costs: costs that differentiate between two alternatives (e.g., opportunity cost)
Irrelevant costs: will not make a difference to either alternative and has no bearing on
decision making (e.g., sunk cost)
Opportunity cost: the
The Cost Function
Chapter 2 addresses the following questions:
What are the different ways to classify costs?
What are different ways to describe cost behaviour?
What is a learning curve?
Raw materials inventory, Jan 1, 2012
Raw materials inventory, Dec 31, 2012
Utilities - factory
Other production costs
Chapter 7: Activity-Based Costing and Management
Q1: How is ABC different from
Q2: What are activities, and how
are they identified?
Q3: What process is used to
assign costs in an ABC
14% (3 out of 21 correct)
B. Provide services to other departments within an organiz
C. Generate revenue for the organization
D. Are not necessary in very large organizations
B. Provide services for
Measuring and Assigning Costs for Income Statements
Chapter 14 addresses the following questions:
Q1 How are absorption costing income statements constructed?
Q2 How are variable costing income statements constructed?
The following information is always relevant
for short-term decisions:
B. Unavoidable costs
C. Sunk costs
Chapter 3: Cost-Volume-Profit Analysis
Q1.What is CVP analysis and
how is it used for decisionmaking?
Q2.How are CVP calculations
performed for a single
Q3. What is a breakeven point?
Q4. How are CVP calc
Chapter 1: The Role of Accounting Information in Management
Q1: How do uncertainties and
biases affect the quality of
Q2: What types of decisions do
managers make for an
Q3: What is
Chapter 10: Static and Flexible Budgets
Q1: What are the relationships
among budgets, long-term
strategies, and short-term
Q2: What is a master budget, and
how is it prepared? How are
operating budgets prep
Chapter 3 addresses the following questions:
What is cost-volume-profit (CVP) analysis, and how is it used for decision making?
How are CVP calculations performed for a single
Chapter 4: Relevant Costs for Nonroutine Operating Decisions
4, 5, 7
1, 3, 6
Q1: What is the process for
making nonroutine operating
Q2: What qualitative factors are
important to nonro
Static and Flexible Budgets
Chapter 10 addresses the following questions:
Q1 What are the relationships among budgets, long-term strategies, and short-term
Q2 What is a master budget, and how is it prepar
Chapter 13: Joint Management of Revenues and Costs
Q3: What is kaizen costing, and
how does it compare to target
Q4: What is life cycle costing?
1, 2, 4
1, 2, 4
Chapter 7: Business Cycles, Unemployment, and Inflation
The Business Cycle
Business Cycle refers to alternating increases and decreases in the
level of economic activity, sometimes over several years
Phases Of The Business Cycle
Peak business activity h
Chapter 14: Measuring and Assigning Costs for Income Statements
Q1: How are absorption costing
Q2: How are variable costing
Q3: What factors affect the
Chapter 5: Job Costing
Q1: How are the costs of products
or services accumulated?
Q2: How are costs assigned to
customized goods and services?
Q3: How is overhead allocated to
Q4: What is the difference
Chapter 6 addresses the following questions:
How are costs assigned to mass-produced products?
What are equivalent units, and how do they relate to the production process?
How is the weighted average method us
Chapter 11: Standard Costs and Variance Analysis
Q1: How are standard costs
Q2: What is variance analysis, and
how is it performed?
Q3: How are direct cost variances
Q4: How is direct cost
Organizations set standards to help plan operations
A standard cost is the expected cost of providing a good or service
In manufacturing, the standard cost of a unit of output is comprised of:
the standard price (SP) of the input, and
Value Chain Analysis
The value chain is the series of sequential business processes an organization
completes in order to deliver goods and services to customers
To manage costs, companies analyze the activities in the value chain
o Non-value-added acti
Budgets, Strategies, & Operating Plans
A budget is
A translation of an organizations strategies.
A method of communicating.
A formalized financial plan.
A way to define areas of responsibility and decision rights
The budget cycle is the series of