Cost-Volume-Profit Analysis

Slides:



Advertisements
Similar presentations
Keterkaitan Cost-Volume-Profit (CVP) Bab 4. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Dasar Analisis Cost-Volume-Profit (CVP) Contribution.
Advertisements

Chapter Eleven Cost Behavior, Operating Leverage, and Profitability Analysis © 2015 McGraw-Hill Education.
Cost-Volume-Profit Analysis
Copyright © 2007 Prentice-Hall. All rights reserved 1 Cost-Volume-Profit Analysis Chapter 7.
Acct 2220 – Chapter 3 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of.
Cost-Volume-Profit Analysis (Contribution Margin) CURL SURFBOARDS
Copyright © 2007 Prentice-Hall. All rights reserved 1 Cost-Volume-Profit Analysis Chapter 21.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 7 Cost-Volume- Profit Analysis.
Chapter 22 Part 2.
McGraw-Hill/Irwin1 © The McGraw-Hill Companies, Inc., Cost-Volume- Profit Analysis Chapter 22.
Cost-Volume-Profit Relationships Chapter 6. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Basics of Cost-Volume-Profit (CVP) Analysis.
6 Slide 1 Cost Volume Profit Analysis Chapter 6 INTRODUCTION The Profit Function Breakeven Analysis Differential Cost Analysis.
Variable Costing Chapter 21 Exercises.
Financial Decision Making 3 Break-even analysis
Cost-Volume-Profit Relationships 11/02/04 Chapter 6.
6 Slide 1 Cost-Volume-Profit Analysis Chapter 6 Main Concepts: 1. Basics of CVP Analysis 2. Contribution Approach 3. Break-Even Analysis a. Equation Method.
Cost-Volume-Profit Relationships 3/10/04 Chapter 6.
Analyzing Cost, Volume, and Pricing to Increase Profitability Chapter 3.
The Basics of Cost-Volume-Profit (CVP) Analysis Contribution margin (CM) is the difference between sales revenue and variable expenses. Next Page Click.
Cost-Volume-Profit Relationships Chapter 6 © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Basics of Cost-Volume-Profit (CVP) Analysis.
Cost-Volume-Profit Analysis
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.
Break-Even and Cost-Volume-Profit Analysis
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA McGraw-Hill/Irwin.
20-1 Cost-Volume Profit Analysis Prepared by Douglas Cloud Pepperdine University Prepared by Douglas Cloud Pepperdine University.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition McGraw-Hill/Irwin Copyright © 2013.
Cost-Volume-Profit Analysis and Variable Costing
Chapter 5. Assumptions of CVP Analysis  Selling price is constant.  Costs are linear.  In multi-product companies, the sales mix is constant.  In.
Chapter 18. Identify how changes in volume affect costs.
Cost-Volume-Profit Relationships Chapter 6. © The McGraw-Hill Companies, Inc., 2002 Irwin/McGraw-Hill 2 The Basics of Cost-Volume-Profit (CVP) Analysis.
McGraw-Hill /Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Cost-Volume-Profit Relationships.
Cost-Volume-Profit Analysis: A Managerial Planning Tool
Chapter 7 Cost-Volume- Profit Analysis Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Chapter 20 Cost-Volume-Profit Analysis
John Wiley & Sons, Inc. © 2005 Chapter 18 Cost-Volume-Profit Relationships Prepared by Barbara Muller Arizona State University West Principles of Accounting.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Cost-Volume-Profit Analysis Chapter 7 1.
Cost-Volume-Profit Analysis: A Managerial Planning Tool Management Accounting: The Cornerstone for Business Decisions Copyright ©2006 by South-Western,
Chapter Six Cost-Volume-Profit Relationships. CVP ANALYSIS Cost Volume Profit analysis is one of the most powerful tools that helps management to make.
Objectives 1. Classify costs by their behavior as variable costs, fixed costs, or mixed costs. 2. Compute the contribution margin, the contribution margin.
Cost-Volume-Profit Relationships Chapter 6 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 18. Identify how changes in volume affect costs.
© The McGraw-Hill Companies, Inc., 2007 McGraw-Hill/Irwin Chapter 22 Cost-Volume-Profit Analysis.
Previous Lecture Chapter 19: Cost-Volume-Profit Analysis
2-1 Profit Planning Prepared by Douglas Cloud Pepperdine University Prepared by Douglas Cloud Pepperdine University 2.
Cost-Volume-Profit Relationships Chapter 6. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin The Basics of Cost-Volume- Profit (CVP) Analysis.
Cost-Volume-Profit Relationships Chapter 6 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Cost-Volume-Profit Relationships.
Chapter 20 Cost-Volume-Profit Analysis
C3 - 1 Learning Objectives Power Notes 1.Cost Behavior 2.Cost-Volume-Profit Relationships 3.Mathematical Approach to Cost-Volume-Profit Analysis 4.Graphic.
Cost Behavior, Operating Leverage, and Profitability Analysis Chapter 11 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights.
Cost-Volume-Profit Analysis
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 7 Cost-Volume- Profit Analysis.
Analysis of Cost- Volume Pricing to increase profitability Chapter 3.
17-1 HANSEN & MOWEN Cost Management ACCOUNTING AND CONTROL.
Contribution Margins. Cost-volume-profit Analysis: Calculating Contribution Margin Financial statements are used by managers to help make good business.
Chapter Eleven Cost Behavior, Operating Leverage, and Profitability Analysis © 2015 McGraw-Hill Education.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition Copyright © 2013 by The McGraw-Hill.
Chapter 17 Cost-Volume-Profit Analysis
Cost-Volume Profit Analysis
Cost-Volume-Profit Relationships
Cost-Volume-Profit Relationships
Cost-Volume-Profit Analysis: A Managerial Planning Tool
Cost Behavior and Cost-Volume-Profit Analysis
AMIS 310 Foundations of Accounting
Lesson 15-2 Determining Breakeven
Electronic Presentation by Douglas Cloud Pepperdine University
Lesson 15-2 Determining Breakeven
Cost-Volume-Profit Relationships
Presentation transcript:

Cost-Volume-Profit Analysis Chapter 21 Cost-Volume-Profit Analysis Demonstration Problems © 2016 Pearson Education, Inc.

For the Month Ended March 31, 2016 For its top managers, Global Travel formats its income statement as follows: Global Travel Income Statement For the Month Ended March 31, 2016 Sales Revenue $ 318,500 Variable Costs 111,475 Contribution Margin 207,025 Fixed Costs 175,000 Operating Income $ 32,025 Jackson’s relevant range is between sales of $250,000 and $360,000. Requirements Calculate the contribution margin ratio. Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) © 2016 Pearson Education, Inc.

E21-31 Requirement 1: Calculate the contribution margin ratio. = © 2016 Pearson Education, Inc.

E21-31 Requirement 1: Calculate the contribution margin ratio. = Contribution margin Net sales revenue © 2016 Pearson Education, Inc.

E21-31 Requirement 1: Calculate the contribution margin ratio. = Contribution margin Net sales revenue $207,025 $318,500 © 2016 Pearson Education, Inc.

E21-31 Requirement 1: Calculate the contribution margin ratio. = Contribution margin Net sales revenue $207,025 $318,500 65% © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 250,000 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 250,000 Variable Costs (35% of sales) 87,500 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 250,000 Variable Costs (35% of sales) 87,500 Contribution Margin 162,500 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 250,000 Variable Costs (35% of sales) 87,500 Contribution Margin 162,500 Fixed Costs 175,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 250,000 Variable Costs (35% of sales) 87,500 Contribution Margin 162,500 Fixed Costs 175,000 Operating Income (Loss) $ (12,500) If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 360,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 360,000 Variable Costs (35% of sales) 126,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 360,000 Variable Costs (35% of sales) 126,000 Contribution Margin 234,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 360,000 Variable Costs (35% of sales) 126,000 Contribution Margin 234,000 Fixed Costs 175,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.) Global Travel Income Statement Sales Revenue $ 360,000 Variable Costs (35% of sales) 126,000 Contribution Margin 234,000 Fixed Costs 175,000 Operating Income (Loss) $ 59,000 If the contribution margin ratio is 65% (that is, contribution margin is 65% of sales), then variable costs must be 35% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Ricky's Repair Shop has a monthly target profit of $17,000. Variable costs are 60% of sales, and monthly fixed costs are $8,000. Requirements Compute the monthly margin of safety in dollars if the shop achieves its income goal. Express Ricky's margin of safety as a percentage of target sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for break-even = © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for break-even = Fixed costs + Target profit Contribution margin ratio © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for break-even = Fixed costs + Target profit Contribution margin ratio If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for break-even = Fixed costs + Target profit Contribution margin ratio $8,000 + $0 40% If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for break-even = Fixed costs + Target profit Contribution margin ratio $8,000 + $0 40% $20,000 If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for target profit = Fixed costs + Target profit Contribution margin ratio If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for target profit = Fixed costs + Target profit Contribution margin ratio $8,000 + $17,000 40% If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Required sales in dollars for target profit = Fixed costs + Target profit Contribution margin ratio $8,000 + $17,000 40% $62,500 If variable costs are 60% of sales, then the contribution margin ratio must be 40% of sales. © 2016 Pearson Education, Inc.

E21-38 Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Margin of safety in dollars = © 2016 Pearson Education, Inc.

E21-38 Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Margin of safety in dollars = Expected sales – Break-even sales © 2016 Pearson Education, Inc.

E21-38 Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Margin of safety in dollars = Expected sales – Break-even sales $62,500 – $20,000 © 2016 Pearson Education, Inc.

E21-38 Requirement 1: Compute the monthly margin of safety in dollars if the company achieves its income goal. Margin of safety in dollars = Expected sales – Break-even sales $62,500 – $20,000 $42,500 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Express Ricky's margin of safety as a percentage of target sales. Margin of safety ratio = © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Express Ricky's margin of safety as a percentage of target sales. Margin of safety ratio = Margin of safety in dollars Expected sales in dollars © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Express Ricky's margin of safety as a percentage of target sales. Margin of safety ratio = Margin of safety in dollars Expected sales in dollars $42,500 $62,500 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Requirement 2: Express Ricky's margin of safety as a percentage of target sales. Margin of safety ratio = Margin of safety in dollars Expected sales in dollars $42,500 $62,500 68% © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. End of Chapter 21 © 2016 Pearson Education, Inc.