Chapter 19 - Cost-volume-profit analysis: Additional issues. In this chapter students will be able to: Apply basic CVP concepts, explain the term sales mix and its effects on break-even sales, Explain how fixed, variable, and semivariable costs respond to changes in the volume of business activity; explain how economies of scale can reduce unit costs; prepare a cost-volume-profit graph. | COST-VOLUME-PROFIT-ANALYSIS: ADDITIONAL ISSUES Accounting, Fifth Edition 19 After studying this chapter, you should be able to: Describe the essential features of a cost-volume-profit income statement. Apply basic CVP concepts. Explain the term sales mix and its effects on break-even sales. Determine sales mix when a company has limited resources. Understand how operating leverage affects profitability. Learning Objectives Preview of Chapter 19 Accounting Fifth Edition Kimmel Weygandt Kieso CVP analysis is: The study of the effects of changes in costs and volume on a company’s profit. Important to profit planning. Critical in management decisions such as: determining product mix, maximizing use of production facilities, setting selling prices. LO 1 Describe the essential features of a cost-volume-profit income statement. Cost-Volume-Profit (CVP) Review Management often wants the information reported in a special format income statement. CVP income statement is for internal use only: Costs and expenses classified as fixed or variable. Reports contribution margin as a total amount and on a per unit basis. LO 1 Describe the essential features of a cost-volume-profit income statement. Basic Concepts Cost-Volume-Profit (CVP) Review LO 1 Describe the essential features of a cost-volume-profit income statement. Illustration 19-1 Basic CVP income statement Basic Concepts Cost-Volume-Profit (CVP) Review LO 1 Describe the essential features of a cost-volume-profit income statement. Detailed CVP income statement Illustration 19-2 Cost-Volume-Profit (CVP) Review Basic Concepts Blue Diamond, Inc. sold 20,000 units and recorded sales of $800,000 for the first quarter of 2014. In making the sales, the company incurred the following costs and expenses. Prepare a CVP income statement for the quarter ended March 31, 2014. Compute the contribution margin per unit. Compute the contribution margin ratio. LO 1 Describe the essential features of a cost-volume-profit income statement. (a) | COST-VOLUME-PROFIT-ANALYSIS: ADDITIONAL ISSUES Accounting, Fifth Edition 19 After studying this chapter, you should be able to: Describe the essential features of a cost-volume-profit income statement. Apply basic CVP concepts. Explain the term sales mix and its effects on break-even sales. Determine sales mix when a company has limited resources. Understand how operating leverage affects profitability. Learning Objectives Preview of Chapter 19 Accounting Fifth Edition Kimmel Weygandt Kieso CVP analysis is: The study of the effects of changes in costs and volume on a company’s profit. Important to profit planning. Critical in management decisions such as: determining product mix, maximizing use of production facilities, setting selling prices. LO 1 Describe the essential features of a cost-volume-profit income statement. Cost-Volume-Profit (CVP) Review Management often wants the information reported in a special format income statement. CVP income statement is for internal use only: .
