微观经济学Cost-volume-profit relationships.pptVIP

Break-even Analysis continued Absorption vs Variable Costing Absorption Costing: - all - direct material - direct labour - variable manufacturing overhead and - fixed manufacturing overhead are aggregated under manufactured cost. i.e. absorbed by the product and treated as Product Cost. e.g. job costing we learned before Absorption vs Variable Costing Variable Costing: - only - direct material - direct labour - variable manufacturing overhead are considered as Product Cost. Fixed manufacturing overhead are treated as Period Cost Variable costing can only be prepared for internal management, cannot be accepted in external financial reporting. Absorption vs Variable Costing In both cases, Selling and Administration expenses are Period Cost Fixed Product cost manufacturing Period cost overhead Example: Text P.927 Fig 22A-2 and Fig 22A-3 Reading Assignment Chapter 22 A comprehensive reading of the whole Chapter is required, together with Effects and Rationale for Variable Costing on Page 924 – 926 P.929 Chapter 22: Questions 1, 4, 6, 15, 18, 19 BE22.1, BE22.4, BE22.9, BE22.10 E22.3, E22.6, E22.8, E22.9 P22.1, P22.3, P22.4, P22.5 BYP22.1 BYP22.3, BYP22.4, BYP22.5 Break-even analysis continued (b) Break-even point can be defined in terms of sales dollars by the formula: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney * Contributionmargin ratio Fixedcosts Break-even  point in dollars ÷ = $200 000 ÷ 40% = $500 000 Break-even analysis continued 3. Graphic presentation An effective way to find the break-even point is to prepare a break-even graph The graph is referred to as a cost-volume-profit (CVP) graph since it shows costs, volume, and profits Units (sales volume) is recorded on horizontal axis Dollars (revenues and costs) are recorded on