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Ch 8: Cost-Volume-Profit Analysis

About This Chapter

In this chapter, use the engaging text lessons to learn about cost-volume-profit analysis. At the end of each lesson, you can use multiple-choice quizzes to assess your familiarity with the topic.

Cost-Volume-Profit Analysis - Chapter Summary and Learning Objectives

A cost-volume-profit analysis is vital in the decision making processes of companies. Managers must understand how to analyze specific costs and deduce cost behavior. This chapter helps you explain cost-volume-profit analysis and the concepts related to it. Our instructors developed short lessons that teach you about concepts like margin of safety. You can also take our quizzes to reinforce the subjects mentioned in the lessons. This chapter explains information like:

  • How to evaluate cost behavior
  • What the cost-volume-benefit analysis is and how to use it
  • How to create contribution margin income statements
  • The definition of a break-even analysis
  • Ways to calculate things like margin of safety, net income or sales mix
  • Why sales mix is particularly important
  • The relationship between cost structure and net income
  • The importance of operating leverage for companies
  • What absorption and variable costing are and when to use each

Lesson Objective
Cost Behavior: Definition & Pattern Analysis Evaluate the three types of costs that businesses must analyze to understand cost behavior.
Significance of the Relevant Range to CVP Relationships Assess how the concept of relevant range is related to cost-volume-profit relationships.
Cost-Volume-Profit Analysis & Income Statements Explain the cost-volume-profit analysis and why it is important to decision making.
Creating Contribution Margin Income Statements Prepare a contribution margin income statement and differentiate it from a regular income statement.
Break-Even Analysis: Definition & Example Consider examples of a break-even analysis.
Target Net Income: Definition & Formula Compare the different ways of finding target net income.
Margin of Safety in Accounting: Definition & Formula Dissect the margin of safety, and learn to calculate it.
Sales Mix: Definition, Formula & Variance Appraise examples of better decision making by business owners.
Sales Mix & Effect on Break-Even Sales Deduce how the break-even point, margin of safety and target net income can be impacted by the sales mix.
Computing the Sales Mix with Limited Resources Measure the sales mix for limited resources, and connect it to the Theory of Constraints.
Impact of Cost Structure on Net Income Analyze how cost structure can affect a company's net income.
Operating Leverage: Definition, Calculation & Examples Evaluate operating leverage and determine how it is calculated.
How to Calculate the Degree of Operating Leverage: Formula & Example Break down operating leverage and why it is important in determining the health of a company.
Managerial Decision Making: Absorption vs. Variable Costing Compare absorption and variable costing to determine which to use.

10 Lessons in Chapter 8: Cost-Volume-Profit Analysis
Test your knowledge with a 30-question chapter practice test
Significance of the Relevant Range to CVP Relationships

1. Significance of the Relevant Range to CVP Relationships

Management must understand the cost of producing each item at different volumes of production. In this lesson, you'll learn how the relevant range impacts cost, volume and profit.

Cost-Volume-Profit Analysis & Income Statements

2. Cost-Volume-Profit Analysis & Income Statements

Cost-volume-profit (CVP) analysis is one way for management to determine the relationship that exists between a company's costs, its revenue, and its sales volume. In this lesson, we'll take a look at how a restaurant might use CVP to look at its revenue.

Creating Contribution Margin Income Statements

3. Creating Contribution Margin Income Statements

When a manager is trying to figure out quickly if variable costs are getting out of control, a contribution margin income statement can be very valuable. In this lesson, we learn about such statements.

Break-Even Analysis: Definition & Example

4. Break-Even Analysis: Definition & Example

Performing a break-even analysis can help you make decisions regarding how much of your product or service you need to sell to make a profit. In this lesson, you'll learn what a break-even analysis is and how it is calculated.

Target Net Income: Definition & Formula

5. Target Net Income: Definition & Formula

Watch this video to learn how a business figures out its target net income. We'll learn the formula as well as explore contribution margin and cost-volume-profit graphs.

Margin of Safety in Accounting: Definition & Formula

6. Margin of Safety in Accounting: Definition & Formula

In this lesson, we will explore margin of safety. We will define the term and apply it to some basic examples. Then, we'll calculate margin of safety before concluding with a summary and a quiz.

Computing the Sales Mix with Limited Resources

7. Computing the Sales Mix with Limited Resources

Businesses face limitations in producing their products or services. In this lesson, you'll learn how a business determines its optimal sales mix with limited resources.

Impact of Cost Structure on Net Income

8. Impact of Cost Structure on Net Income

Depending on how you decide to structure your costs, there could be an impact on net income. In this lesson, we see how to not only affect the net income with cost structure, but also how to track it.

Operating Leverage: Definition, Calculation & Examples

9. Operating Leverage: Definition, Calculation & Examples

Explore the definition and importance of operating leverage, and take a look at examples to assist you in the accounting process. When you are finished with the lesson, there is a quiz to test your knowledge.

Managerial Decision Making: Absorption vs. Variable Costing

10. Managerial Decision Making: Absorption vs. Variable Costing

Companies often have many decisions to make regarding setting prices. In this lesson, we look at two ways to set prices, one using absorption costing and the other using variable costing.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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