COMM 305 Chapter Notes - Chapter 6: Contribution Margin, Fixed Cost, Earnings Before Interest And Taxes
19 Feb 2017
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Cost-volume-profit analysis, income statement, and the contribution margin. Cost-volume-profit (cvp) analysis - study of effects of changes in costs and volume on company"s profits. Cvp considers interrelationships among components shown below: 4: when > 1 type of product sold, sales mix will stay constant inventory levels remain constant (all units produced are sold) (percentage of total sales each product represents will stay same) Cost-volume-profit (cvp) income statement - for internal use and classifies costs and expenses as fixed or variable and reports contribution margin in body of statement. Often shows total and per- unit amount to help cvp analysis. Contribution margin (cm) - amount of revenue remaining after deducting variable costs. Contribution margin per unit - amount of revenue remaining per unit after deducting variable costs. Contribution margin ratio - percentage of each dollar of sales available to contribute to operating income. Break-even point - level of activity where total revenues equal total costs.
