Break-even analysis and cost-volume-profit analysis
CVP analysis looks at the effect of sales volume variations on costs and operating profit. The analysis is based on the classification of expenses as variable (expenses that vary in direct proportion to sales volume) or fixed (expenses that remain unchanged over the long term, irrespective of the sales volume). Accordingly, operating income is defined as follows:
Operating Income = Sales – Variable Costs – Fixed Costs
A CVP analysis is used to determine the sales volume required to achieve a specified profit level. Therefore, the analysis reveals the break-even point where the sales volume yields a net operating income of zero and the sales cutoff amount that generates the first dollar of profit.
Cost-volume profit analysis is an essential tool used to guide managerial, financial and investment decisions.
COST-VOLUME PROFIT ANALYSIS
Contribution Margin and Contribution Margin Percentage
The first step required to perform a CVP analysis is to display the revenue and expense line items in a Contribution Margin Income Statement and compute the Contribution Margin Ratio.
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- Introduction, Organization and overview of the course.
- concept and classification of costs.
- Cost of goods sold, cost of good manufactured
- Cost of goods sold, cost of good manufactured
- Costing and control of material,
- Costing and control of material,
- costing and control of labour,
- costing and control of labour,
- costing and control of factory over head
- Factory Overhead Departmentalization
- product cost accumulation systems
- product cost accumulation systems
- Job order Costing
- Job order Costing
- Job order Costing
- Job order Costing
- Process costing
- Process costing
- Process costing
- Process costing
- Joint product and by product costing
- Joint product and by product costing
- Joint product and by product costing
- Joint product and by product costing
- Budgeting
- Budgeting
- Budgeting
- Budgeting
- Direct and absorption costing
- Direct and absorption costing
- Break-even analysis and cost-volume-profit analysis
- Break-even analysis and cost-volume-profit analysis
- Chapters 32
- Department Noon Business School
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Shahid Mahmood
