AFM123 Chapter Notes - Chapter 8: Total Absorption Costing, Contribution Margin, Income Statement
29 Mar 2016
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Document Summary
Cost-volume-proit (cvp) analysis is one of the most powerful tools managers have: helps them understand interrelationships among cost, volume, and proit in an organization in order to determine: This tool shows how proits would be afected by the diferent decisions and operating choices that a company makes. Characteristics: diferent form the absorption costing income statement. The absorption costing format is ideal for external inancial reporting where the goal is to record the costs and expenses and report them to the company"s stakeholders. Consider the following information developed by the accountant at wind bicycle co: For each additional unit wind sells, more in contribution margin will help to cover ixed expenses and proit. Each month wind must generate at least ,000 in total cm to break even. If wind sells 400 units in a month, it will be operating at the break-even point. The contribution format income statement can be expressed in equation form as follows:
