1. Profit Planning: An Overview Chapter 2 Managerial Accounting Concepts and Empirical Evidence

2. Basics of Profit Planning Profit Price Variable Unit Costs Fixed Costs Units

3. Basics of Profit Planning

4. Cost-Volume-Profit Relationship $ Quantity ‘X’ FC Fixed Costs

5. Cost-Volume-Profit Relationship $ X TVC = VC  X FC Total Variable Cost Variable Cost / Unit

6. Cost-Volume-Profit Relationship $ X TC = TVC + FC TVC FC Total Costs

7. Cost-Volume-Profit Relationship X BE $ X TR = P  X TC TVC FC Breakeven Units Total Revenues Price

8. Profit Line -FC X BE  Profits  = TR  TC = PXPX -VC  X - FC

9. Contribution Margin Analysis Revenue - TVC = CM 1,250,000 - 620,000 = 630,000

10. Contribution Margin Analysis CM  FC = Profits 50,000  100,000 =  50,000

11. Contribution Margin Analysis

12. Non-Linear Cost-Volume-Profit Analysis Total Revenue X $

13. Non-Linear Cost-Volume-Profit Analysis Total Revenue X $ Total Costs X3X3 X2X2 X1X1

14. Relevant Range Concept X BE $ X TR TC TVC FC X U X L X L = Lower Bound X U = Upper Bound

15. Relevant Range Concept X BE $ X TR TC TVC FC X U X L Relevant Range

16. Profit Line & Uncertainty -FC X BE  Profits  X  = (P  -VC)  X - FC Mean profit Mean Units