Textbook Notes (363,212)
Canada (158,271)
Accounting (242)
ACCT 2230 (113)
Chapter 7

Chapter 7 Managerial Accounting Notes

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University of Guelph
ACCT 2230
Elliot Currie

Chapter 7 Accounting NotesCostValueProfit RelationshipsCVP focuses on how profits are affected by prices of products volumelevel of activity per unit variable costs fixed costs and mix of products soldThe Basics of CostValueProfit CVP Analysis Contribution income statement emphasizes the behaviour costs and therefore is helpful to managers who are judging the impact on profits of changes in selling cost price or volume Reports sales variable expensescontribution margin on both per unit and total basisContribution Margin The amount remaining from sales revenue after variable expenses have been deducted will be used to cover fixed expenses first THEN whatever remains goes towards profits Operating loss occurs if contribution margin cant cover fixed expensesCVP Relationships in Graphics Form A CPV graph highlights CPV relationships over wide ranges of activityPreparing the CPV GraphUnit volume is represented on horizontal xaxisdollars on vertical yaxisSee page 277 to view setupContribution Margin CM Ratio The contribution margin as a percentage of total salesCM RATIOContribution Margin Sales This ratio shows how the contribution margin will be affected by a change in total sales Particularly valuable in those
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