Production Report – Weighted-Average
-A quantity schedule showing the flow of units and the computation of equivalent units. -A computation of cost per equivalent unit.
-Cost Reconciliation section shows the reconciliation of all cost flows into and out of the department during the period.
Cost-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 products
2. volume or level of activity
3. per unit variable costs
4. total fixed costs
5. mix of products sold
Unit Contribution Margin:
p – v
Total Contribution Margin:
(p - v) *Q
Contribution Margin Ratio:
Breakeven Point: The point at which revenues equal total cost, and the profit is zero. * Equation Method:
p*Q = f + v*Q
* Contribution Margin Method
Breakeven in Units:
Q = f / (p-v)
(Fixed expenses / CM per unit) Breakeven in Dollars:
Y = p*Q = p*f / (p-v) = f / [(p-v)/p)] (Fixed expense/CM ratio)
determine the sales volume needed to achieve a target profit： Sales = variable expenses + fixed expenses + profit
Margin of safety = total sales – break-even sales
Operating leverage: a measure of how sensitive net operating income is to percentage changes in sales Degree of operating leverage = Contribution margin / net operating income
Sales mix is the relative proportion in which a company’s products are sold.
Assumption in CVP analysis:
* Selling price is constant.
* Costs are linear and can be accurately divided into variable (constant per unit) and fixed (constant in total) elements. * In multiproduct companies, the sales mix is constant.
* In manufacturing companies, inventories do not change (units produced = units sold).
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