About This Chapter
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
|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.|
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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Other chapters within the Accounting 301: Applied Managerial Accounting course
- Corporate Governance for Managerial Accounting
- Financial Statements & Balance Sheets
- Cost Classifications
- Manufacturing Overhead Cost Allocation
- Job Order Cost System
- Process Cost System
- Activity-Based Costing
- Decision Making in Managerial Accounting
- Pricing Objectives & Methods
- Budgetary Control
- Standard Costs
- Capital Budgeting
- Statement of Cash Flows
- Financial Statement Analysis
- Software for Managerial Accounting
- Required Assignments for Accounting 301
- Studying for Accounting 301