This document discusses cost-volume-profit (CVP) analysis through six learning objectives. It provides examples and formulas to calculate break-even points, target profits, revenue requirements, and the impact of multiple products. Graphs are presented to illustrate profit-volume and cost-volume-profit relationships. The document explains that CVP analysis assumes linear cost and revenue functions and examines how risk, uncertainty, and changing variables affect CVP results. Managers are advised to consider margin of safety, operating leverage, and sensitivity analysis when using CVP analysis under uncertainty.
Learning Objectives:
Determine the break-even point and output to achieve target operating income
Incorporate income tax considerations into CVP analysis
Determine and explain operating leverage
Draw the breakeven graph and the cost-volume-profit graph
Learning Objectives:
Determine the break-even point and output to achieve target operating income
Incorporate income tax considerations into CVP analysis
Determine and explain operating leverage
Draw the breakeven graph and the cost-volume-profit graph
Income statement Functional Format,Linear cost Function,Method of Analyzing cost,Comparison of variable costing , unit cost computation, Illustration of variable costing , evaluation of results. Managerial Accounting
Income statement Functional Format,Linear cost Function,Method of Analyzing cost,Comparison of variable costing , unit cost computation, Illustration of variable costing , evaluation of results. Managerial Accounting
INTRODUCTION
A breakeven analysis is used to determine how much sales volume your business needs to start making a profit.
The breakeven analysis is especially useful when you're developing a pricing strategy, either as part of a marketing plan or a business plan.
In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even".
Total cost = Total revenue = B.E.P.
EGT267 Programming for Engineering Applications Spring 2020 .docxgidmanmary
EGT267 Programming for Engineering Applications Spring 2020
1
EGT 267 HW-1 (Due on February 20 in the class)
PROGRAMMIING ENGINEERING PROBLEMS
Problem 1: (Conversions) This problem involves converting a value in one unit to a value in
another unit. The program should prompt the user for a value in the specified units and then print
the converted value, along with the new units.
(1) Write a program to convert pounds to kilograms. (Recall that 1 kg = 2.205 lb). The pound
value you input/test is 159 lb.
Problem 2: (Areas and Volumes) This problem involves computing an area or a volume using
input from the user. The program should include a prompt to the user to enter the variables needed.
(1) Write a program to compute the area of a triangle with base b and height h. (Recall that
Aerea = ½* (b * h). ) The b and h values are 1.8 and 6.7 meters, respectively.
Problem 3: (Wind Tunnels) A wind tunnel is a test chamber built to generate different wind
speeds, or Mach numbers (which is the wind speed divided by the speed of sound). Accurate scale
models of aircraft can be mounted on force-measuring supports in the test chamber, and then
measurements of the forces on the model can be made at many different wind speeds and angles.
At the end of an extended wind tunnel test, many sets of data have been collected and can be used
to determine the coefficient of lift, drag, and other aerodynamic performance characteristics of the
new aircraft at its various operational speeds and positions. Data collected from a wind tunnel test
are listed in the following table:
EGT267 Programming for Engineering Applications Spring 2020
2
Assume that we would like to use linear interpolation to determine the coefficient of lift for
additional flight-path angles that are between -4 degrees and 21 degrees (Let’s estimate the
coefficient of lift @ 9 flight-path angle degrees). Write a program that allows the user to enter the
data for two points and a flight-path angle between those points. The program should then compute
the corresponding coefficient of lift.
Homework requirements:
please take two screenshots (one screen shot is for your code; the other is for the results), copy &
past them into your homework, and then submit a hard copy.
Sheet1MAC 7200, CASE STUDY WEEK 61) BREAK EVEN POINTA) IN UNITSSales Revenue16.00 Variable Materials3.00 Variable Labor1.00 Variable Overhead3.50 Variable Marketing Costs1.50Total Variable Costs:9.00CONTRIBUTION MARGIN PER UNIT7.0044%Fixed overhead4.00Fixed Marketing costs2.00Total Fixed Costs6.00BREAK EVEN POINT IN UNITS = FIXED COSTS / CONTRIBUTION MARGIN PER UNITEQUATION16N - 9N - 90,000 = 0Fixed Costs:90,000.007N = 90000CONTRIBUTION MARGIN PER UNIT7.00BREAK EVEN POINT IN UNITS12,857N=B) BREAK EVEN IN DOLLARSUNITS BREAKEVEN12,857SALES PRICES$ 16.00BREAK EVEN IN DOLLARS$ 205,712.00Combined2. SPECIAL ORDER ANALYSISremainder of ca ...
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
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If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
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Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
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The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
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what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
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1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
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Right now the only way to sell pi coins is by trading with a verified merchant.
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A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
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I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
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3. 3
1. Determine the number of units sold to break
even or earn a targeted profit.
2. Calculate the amount of revenue required to
break even or earn a targeted profit.
3. Apply cost-volume-profit analysis in a
multiple-product setting.
LEARNING OBJECTIVESLEARNING OBJECTIVES
Continued
4. 4
4. Prepare a profit-volume graph & a cost-
volume-profit graph, and explain the
meaning of each.
5. Explain the impact of risk, uncertainty, &
changing variables on cost-volume-profit
analysis.
6. Discuss the impact of activity-based costing
on cost-volume-profit analysis.
LEARNING OBJECTIVESLEARNING OBJECTIVES
Click the button to skip
Questions to Think About
5. 5
QUESTIONS TO THINK ABOUT:
McFarland’s Fine Foods
What kinds of variable & fixed
costs do you think Janet will
incur?
6. 6
QUESTIONS TO THINK ABOUT:
McFarland’s Fine Foods
Given Bob’s initial assessment that
variable costs are higher than the
price, what is wrong with Janet’s
though that selling more is the way
to go?
7. 7
QUESTIONS TO THINK ABOUT:
McFarland’s Fine Foods
How important is break-even
analysis to a firm? Do you
suppose that large companies do
break-even analysis as well as
small companies?
8. 8
QUESTIONS TO THINK ABOUT:
McFarland’s Fine Foods
Why is the concept of breaking
even important? Doesn’t Janet want
to make a profit? If Janet doesn’t
know what price to charge, how
could she get a better idea?
9. 9
1
Determine the number of
units sold to break even
or earn a targeted profit.
LEARNING OBJECTIVELEARNING OBJECTIVE
10. 10
COST-VOLUME-PROFIT (CVP)
CVP expresses:
# units that must be sold to break even
Impact of a given reduction in fixed costs on
break-even point
Impact of an increase in price on profit
Sensitivity analysis of impact of various price or
cost levels on profit
LO 1
12. 12
UNIT: Examples
Examples of unit of measurement
Procter & Gamble: bar of Ivory soap
McFarland: jar of salsa
Southwest Air Lines
Passenger mile
One-way trip
LO 1
13. 13
FORMULA: Operating Income
Operating income includes revenues &
expenses from the firm’s normal operations.
LO 1
Operating Income
= Sales revenue
– Variable expenses
– Fixed expenses
19. 19
FORMULA: Break-Even
Break-even using contribution margin.
LO 1
Break-even units:
# Units = Fixed cost / Unit contribution margin
# Units = $45,000 / ($400 - $325)
= 600
20. 20
WHITTIER CO.: √Income StatementWHITTIER CO.: √Income Statement
LO 1
Sales (600 units @ $400) $ 240,000
Less: Variable expenses 195,000
Contribution margin $ 45,000
Less: Fixed expenses 45,000
Operating income $ 0
√Check-up on break-even
21. 21
FORMULA: Target Profit
Target profit is profit desired.
LO 1
Target profit in dollars:
$ 60,000 = ($400 x Units) – ($325 x Units) - $45,000
$105,000 = $75,000 x Units
Units = 1,400
22. 22
FORMULA: Target Profit in Units
Target profit is profit desired.
LO 1
Target profit in units:
# Units = (Fixed cost + Target profit)
Unit contribution margin
# Units = ($45,000 + $60,000) / ($400 - $325)
# Units = 1,400
23. 23
WHITTIER CO.: √Income StatementWHITTIER CO.: √Income Statement
LO 1
Sales (600 units @ $400) $ 560,000
Less: Variable expenses 455,000
Contribution margin $ 105,000
Less: Fixed expenses 45,000
Operating income $ 60,000
√Check-up on target profit
24. 24
Can we calculate target
profit by another way than
dollars & units?
Yes! Target income can be
calculated as a percent of
revenue.
LO 1
25. 25
FORMULA: Target Profit % Sales
Target profit can be calculated as % of
revenue.
LO 1
Target profit as % of sales:
0.15 ($400 x Units) =
($400 x Units) – ($325 x Units) - $45,000
$60 x Units = ($75 x Units) - $45,000
# Units = 3,000
26. 26
Can we calculate units
required to produce after
tax target profits?
Yes! First, calculate the level of
operating profit, then translate
into number of units.
LO 1
27. 27
FORMULA: After-Tax Target Profit
If Whittier has a 35% tax rate & wants
Net income (after-tax profit) of $48,750.
LO 1
After-tax target profit:
Net income = Operating income (1 – Tax rate)
$48,750 = Operating income (1 – 0.35)
$75,000 = Operating income
28. 28
WHITTIER CO.: √Income StatementWHITTIER CO.: √Income Statement
LO 1
Sales (1,600 units @ $400) $ 640,000
Less: Variable expenses 520,000
Contribution margin $ 120,000
Less: Fixed expenses 45,000
Operating income $75,000
Less: Income taxes (35%) 26,250
Net income $ 48,750
√Check-up on target profit
29. 29
2
Calculate the amount of
revenue required to
break even or earn a
targeted profit.
LEARNING OBJECTIVELEARNING OBJECTIVE
36. 36
Can we use CVP if
Whittier has more than 1
product?
Yes. But we have to add direct
fixed expenses into the
analysis.
LO 3
37. 37
DIRECT FIXED EXPENSES:
Definition
DIRECT FIXED EXPENSES:
Definition
Are fixed costs that can be
traced to each product and
would be avoided if the product
did not exist.
LO 3
38. 38
WHITTIER CO.: Sales BackgroundWHITTIER CO.: Sales Background
LO 3
Mulching Riding Total
Sales (1,000 units @ $400) $ 480,000 $640,000 $1,120,000
Less: Variable expenses 390,000 480,000 870,000
Contribution margin $ 90,000 $160,000 $ 250,000
Less: Direct fixed exp. 30,000 40,000 70,000
Product margin $ 60,000 $120,000 $ 180,000
Less: Fixed expenses 26,250
Operating income $ 153,750
Operating income for multiple products.
50. 50
ASSUMPTIONS OF CVP
CVP analysis assumes
Linear revenue & cost functions
Price, total fixed costs, & unit variable costs can
be accurately identified & remain constant over the
relevant range
What is produced is sold
Sales mix is known
Selling prices & costs are known with certainty
LO 4
53. 53
5
Explain the impact of
risk, uncertainty, &
changing variables on
cost-volume-profit
analysis.
LEARNING OBJECTIVELEARNING OBJECTIVE
54. 54
What can Whittier do to
increase sales of mulching
mowers?
Sales can be increased by some
combination of increased
advertising and decreased
prices.
LO 5
55. 55
ALTERNATIVES
For the mulching mower are:
#1 If advertising expenditures increase by $8,000,
sales will increase from 1,600 to 1,725 mowers.
#2 A price decrease from $400 to $375 per mower
will increase sales from 1,600 to 1,900.
#3 Decreasing price to $375 and increasing
advertising expenditures by $8,000 will increase
sales from 1,600 to 2,600 mowers.
For the mulching mower are:
#1 If advertising expenditures increase by $8,000,
sales will increase from 1,600 to 1,725 mowers.
#2 A price decrease from $400 to $375 per mower
will increase sales from 1,600 to 1,900.
#3 Decreasing price to $375 and increasing
advertising expenditures by $8,000 will increase
sales from 1,600 to 2,600 mowers.
LO 5
59. 59
How should Whittier use
the results of analysis in
the 3 alternatives?
Whittier should consider its
choice in the context of Risk &
Uncertainty.
LO 5
60. 60
RISK & UNCERTAINTY
For Whittier, risk includes the fact that prices and
costs can not be predicted with certainty. Risk
assumes that the distributions of the variables
in question are known (i.e., we know how
sales will react in response to changes in price
or cost). Under uncertainty, these distributions
are not known.
For Whittier, risk includes the fact that prices and
costs can not be predicted with certainty. Risk
assumes that the distributions of the variables
in question are known (i.e., we know how
sales will react in response to changes in price
or cost). Under uncertainty, these distributions
are not known.
LO 5
61. 61
What should Whittier
consider in addressing risk
& uncertainty?
Whittier should consider its margin
of safety, operating leverage, and
sensitivity analysis to CVP.
LO 5
62. 62
MARGIN OF SAFETY: DefinitionMARGIN OF SAFETY: Definition
Is the difference between break-
even volume or sales and
expected volume or sales.
LO 5
65. 65
SENSITIVITY ANALYSIS
LO 5
EXHIBITEXHIBIT 11-811-8
Under 2 systems, the same
change in price will have
different effects on elements
of CVP, & response to risk
& uncertainty.
66. 66
6
Discuss the impact of
activity-based costing on
cost-volume-profit
analysis.
LEARNING OBJECTIVELEARNING OBJECTIVE
67. 67
ABC & CVP
ABC divides costs into unit-based &
non-unit-based categories. CVP
has to adjust its formulas to
incorporate this division.
ABC divides costs into unit-based &
non-unit-based categories. CVP
has to adjust its formulas to
incorporate this division.
LO 6
68. 68
FORMULA: ABC & CVP
ABC breaks CVP up into unit variable
costs & other non-unit level costs.
LO 6
Break-even =
[Fixed cost + (Unit VC x # Units)
+ (Setup cost x # Setups)
+ Engineering cost x # Engineering hours)] ÷
(Price – Unit variable cost)
69. 69
ABC & CVP: BackgroundABC & CVP: Background
LO 6
Activity Driver Unit VC
Level of Activity
Driver
Units sold $10 ----
Setups 1,000 20
Engineering hours 30 1,000
Other data:
Total fixed costs (conv.) $ 100,000
Total fixed costs (ABC) 50,000
Unit selling price 20
Data to compare conventional & ABC analysis.
70. 70
FORMULA: Conventional CVP
LO 6
# Units
= [Targeted income + Conventional fixed cost ] ÷
(Price – Unit variable cost)
= ($20,000 + $100,000) ÷ ($20 - $10)
= 12,000 Units
71. 71
FORMULA: ABC CVP
LO 6
# Units
= [Targeted income + ABC Fixed cost +
(Setup cost x # Setups) +
(Engineering cost x # Engineering hours)] ÷
(Price – Unit variable cost)
= ($20,000 + $50,000 + ($1,000 x 20) + ($30 x 1,000)] ÷ ($20 - $10)
= 12,000 Units
72. 72
What are the strategic
implications of the 2
approaches to analyzing
CVP?
An ABC approach to CVP allows
for a better defined breakdown of
costs to analyze alternative
recommendations.
LO 6