Tài liệu Analysis of Cost, Volume, and Pricing

Analysis of Cost, Volum and Pricing to Increase Profitability

LEARNING OBJECTIVES
After you have mastered the material in this chapter, you will be able to
1 Use the equation method to determine the break-even point.
2 Use the contribution margin per unit method to determine the break-even
3 Use the contribution margin ratio method to determine the break-even po
4 Determine the sales volume required to attain a desired profit.
5 Set selling prices by using cost-plus, prestige, and target costing.
6 Explain cost-volume-profit relationships.
7 Draw and interpret a cost-volume-profit graph.
8 Calculate and interpret the margin of safety.
9 Conduct sensitivity analysis for cost-volume-profit relationships.
10 Perform multiproduct cost-volume-profit analysis.

CHAPTER OPENING
The president of Bright Day Distributors recently completed a managerial accounting course. He was particularly
struck by the operating leverage concept. His instructor had demonstrated how a small percentage increase in
sales volume could produce a significantly higher percentage increase in profitability. Unfortunately, the discussion
had been limited to the effects of changes in sales volume. In practice, changes in sales volume are often related to
changes in sales price. For example, reducing selling prices often leads to increases in sales volume. Sales volume may also change in response to cost changes such as increasing the advertising budget. Furthermore, significant
changes in sales volume could redefine the relevant range, changing the fixed and variable costs. Bright Day’s
president realized that understanding operating leverage was only one piece of understanding how to manage a
business. He also needed to understand how changes in prices, costs, and volume affect profitability. Bright Day’s
president is interested in cost-volume-profit (CVP) analysis.