BUS 254 Lecture 5: BUS 245 Lecture 5: CVP

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Michael Favere-Marchesi

Document Summary

Effect of changes in cost and volume on profits. Don"t wait at the end of the year to determine profit; consider change in prices and volume. When more than 1 product is sold. Remember costs and revenues are linear within relevant range. All costs are variable or fixed (or mixed with a variable portion or a fixed portion) Changes in costs are only due to changes in volume. Inventory levels are constant (unit produced = unit sold) -> the goal of jit. If this changes, so does everything in the cvp. All costs are classified as variable or fixed. Shows a contribution margin instead of a gross margin. Cm per unit (ucm) = selling price per unit (usp) - variable cost per unit (uvc) Every of ucm helps to cover tfc. When tcm = tfc , then profit is 0. The contribution margin can be expressed as a percentage of sales price.