SMG AC 222 Lecture Notes - Lecture 5: Contribution Margin, Operating Leverage, Income Statement
Document Summary
Course learning objectives covered: understand how costs behave in relation to the volume of business, learn to make decisions about the future of the organization, using the financial and non-financial tools and information available to you. Review chapter 2 on fixed and variable costs. Operating leverage (not the same as the financial leverage you learned about in. Economic point of indifference between two cost structures. Assumptions we make in cost volume profit analysis: Price will remain constant unless we decide to change it. Product mix remains constant, unless managers decide to change it. Cvp calculations are always made using before tax amounts. The contribution margin is defined as sales minus all variable costs (production, selling, administrative). The break even point is that volume of sales at which. In the cvp graph, we graph volume on the x axis, and dollars on the y-axis.
