Chapter 5: Cost-volume-profit relationships. After studying this chapter, you should be able to: Distinguish between variable and fixed costs, explain the meaning and importance of the relevant range, explain the concept of mixed costs, state the five components of cost-volume-profit analysis, indicate the meaning of contribution margin and the ways it may be expressed,. | John Wiley & Sons, Inc. Prepared by Karleen Nordquist The College of St. Benedict. and St. John’s University. with contributions by Marianne Bradford The University of Tennessee. Gregory K. Lowry . Macon Technical Institute Managerial Accounting Weygandt, Kieso, & Kimmel 1 Chapter 5 Cost-Volume-Profit Relationships After studying this chapter, you should be able to: 1 Distinguish between variable and fixed costs. 2 Explain the meaning and importance of the relevant range. 3 Explain the concept of mixed costs. 4 State the five components of cost-volume-profit analysis. 5 Indicate the meaning of contribution margin and the ways it may be expressed. Chapter 5 Cost-Volume-Profit Relationships After studying this chapter, you should be able to: 6 Identify the three ways that the break-even point may be determined. 7 Define margin of safety and give the formulas for computing it. 8 Give the formulas for determining sales required to earn target net income. 9 Describe the . | John Wiley & Sons, Inc. Prepared by Karleen Nordquist The College of St. Benedict. and St. John’s University. with contributions by Marianne Bradford The University of Tennessee. Gregory K. Lowry . Macon Technical Institute Managerial Accounting Weygandt, Kieso, & Kimmel 1 Chapter 5 Cost-Volume-Profit Relationships After studying this chapter, you should be able to: 1 Distinguish between variable and fixed costs. 2 Explain the meaning and importance of the relevant range. 3 Explain the concept of mixed costs. 4 State the five components of cost-volume-profit analysis. 5 Indicate the meaning of contribution margin and the ways it may be expressed. Chapter 5 Cost-Volume-Profit Relationships After studying this chapter, you should be able to: 6 Identify the three ways that the break-even point may be determined. 7 Define margin of safety and give the formulas for computing it. 8 Give the formulas for determining sales required to earn target net income. 9 Describe the essential features of a cost-volume-profit income statement. Chapter 5 Cost-Volume-Profit Relationships Preview of Chapter 5 Cost Behavior Analysis Variable Costs Fixed Costs Relevant Range Mixed Costs Identifying Variable and Fixed Costs COST-VOLUME-PROFIT RELATIONSHIPS Preview of Chapter 5 Cost-Volume-Profit Analysis Basic Components Contribution Margin Break-Even Analysis Margin of Safety Target Net Income Changes in Business Environment CVP Income Statement COST-VOLUME-PROFIT RELATIONSHIPS Cost Behavior Analysis Cost behavior analysis is the study of how specific costs respond to changes in the level of activity within a company. The starting point in cost behavior analysis is measuring the key activities in the company’s business. Activity levels may be expressed in terms of sales dollars (retail company), miles driven (trucking company), room occupancy (hotel), or number of dance classes taught (dance studio). Cost Behavior Analysis For an activity level to be useful in cost behavior .
