# Rsm222

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.

CH 7

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: (p-v) /p

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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