ACCT 2230 Chapter : Managerial Accounting Chapter Seven Notes
14 Jan 2012
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Document Summary
Chapter seven- cost volume-profit relationships y cost volume profit (cvp) analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit. contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. It is the amount available to cover fixed expenses and then to provide profits for the period. contribution margin is used first to cover the fixed expenses, and then whatever remains goes toward profits. If the contribution margin is not sufficient to cover the fixed expenses, then a loss occurs for the period. break even point is the level of sales at which profit is zero. The break-even point can also be defined as the point where total sales equals total expenses or as the point where total contribution margin equals total fixed expenses. A cvp graph highlights cvp relationships over wide ranges of activity: preparing the cvp graph.
