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CHAPTER 6 Cost-Volume-Profit Analysis: Additional Issues



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Page 6 1 Cost Volume Profit Cost Volume Profit Analysis Analysis Additional Additional Issues Issues Managerial Accounting Fifth Edition Weygandt Kimmel Kieso Page 6 2 study objectives 1 Describe the essential features of a cost volumeprofit income statement 2 Apply basic CVP concepts 3 Explain the term sales mix and its effects on breakeven sales 4 Determine sales mix when a company has limited resources 5 Understand how operating leverage affects profitability Page 6 3 preview of chapter 6 Page 6 4 Cost Volume Profit Cost Volume Profit CVP CVP Review Review CVP analysis is The study of the effects of changes in costs and volume on a company s profit Important to profit planning Critical in management decisions such as Page 6 5 determining product mix maximizing use of production facilities setting selling prices SO 1 Describe the essential features of a cost volume profit income Cost Volume Profit Cost Volume Profit CVP CVP Review Review Basic Concepts Management often wants the information reported in a special format income statement The CVP income statement is for internal use only Costs and expenses classified as fixed or variable Reports contribution margin as a total amount and on a per unit basis Page 6 6 SO 1 Describe the essential features of a cost volume profit income Cost Volume Profit Cost Volume Profit CVP CVP Review Review Basic Concepts Basic CVP income statement Page 6 7 Illustration 61 SO 1 Describe the essential features of a cost volume profit income Cost Volume Profit Cost Volume Profit CVP CVP Review Review Basic Concepts Detailed CVP income statement Page 6 8 Illustration 62 SO 1 Describe the essential features of a cost volume profit income Cost Volume Profit Cost Volume Profit CVP CVP Review Review K Christel Inc sold 20 000 units and recorded sales of 800 000 for the first quarter of 2011 In making the sales the company incurred the following costs and expenses a Prepare a CVP income statement for the quarter ended March 31 2011 b Compute



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