Topics: Variable cost, Contribution margin, Costs Pages: 2 (287 words) Published: January 29, 2013
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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