MGAB03H3 Lecture Notes - Lecture 3: Gross Margin, Contribution Margin, Net Income

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The major benefit of cvp analysis is to improve planning and actions. It has been said the success of management accounting depends on whether decisions of managers are better because of the accounting information provided to them . After studying this chapter, you should be able to: understand basic assumptions and essential features of cost volume profit (cvp, determine the breakeven point and target operating income using equation, contribution margin and graph methods, including incorporating tax considerations, explain the use of cvp analysis in decision making and how sensitivity analysis captures uncertainty margin of safety and the degree of operating leverage, apply cvp analysis to: Central to cvp analysis is classifying all inventoriable (product) and period costs as either variable costs or fixed costs. If we relax some, it can be more complicated and perhaps the simplicity of cvp tool may not be applicable. Taxable income minus tax expense equals net income.

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