本—量—利關(guān)系

1、1,Lecture 2Topic 3: Cost-Volume-Profit Relationships,,MAA 703 Management Accounting,2,COST VOLUME PROFIT (CVP) ANALYSIS,Shows how alternate actions can affect profit.Focuses on the relationship between cost, volume an

2、d profit.It enables us to:(1) determine the break-even level of production, and(2) predict how changes in the level of production, selling price or costs will affect profit,3,The Basics of Cost-Volume-Profit Anal

3、ysis,Contribution Margin (CM) is the amount remaining from sales revenue after variable expenses have been deducted.,,4,The Basics of Cost-Volume-Profit Analysis,CM goes to cover fixed expenses.,5,The Basics of Cost-Volu

4、me-Profit Analysis,After covering fixed costs, any remaining CM contributes to profit.,6,The Contribution Approach,For each additional unit Wind sells, $200 more in contribution margin will help to cover fixed expenses a

5、nd profit.,7,The Contribution Approach,Each month Wind must generate at least $80,000 in total CM to break even.,8,The Contribution Approach,If Wind sells 400 units in a month, it will be operating at the break-even poin

6、t.,,,9,The Contribution Approach,If Wind sells one more bike (401 bikes), net operating income will increase by $200.,10,CVP Relationships in Graphic Form,Viewing CVP relationships in a graph is often helpful. Consider

7、the following information for Wind Co.:,11,CVP Graph,Units,Dollars,12,Units,Dollars,CVP Graph,,,Profit Area,Loss Area,13,Contribution Margin Ratio,The contribution margin ratio is:For Wind Bicycle Co. the ratio is:,1

8、4,Contribution Margin Ratio,Or, in terms of units, the contribution margin ratio is:For Wind Bicycle Co. the ratio is:,15,Contribution Margin Ratio,At Wind, each $1.00 increase in sales revenue results in a total con

9、tribution margin increase of 40¢.If sales increase by $50,000, what will be the increase in total contribution margin?,16,Contribution Margin Ratio,17,Contribution Margin Ratio,18,Quick Check ?,Coffee Klatch is an

10、 espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold e

11、ach month on average. What is the CM Ratio for Coffee Klatch?a. 1.319b. 0.758c. 0.242d. 4.139,19,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of

12、coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold each month on average. What is the CM Ratio for Coffee Klatch?a. 1.319b. 0.758c. 0

13、.242d. 4.139,,20,Changes in Fixed Costs and Sales Volume,Wind is currently selling 500 bikes per month. The company’s sales manager believes that an increase of $10,000 in the monthly advertising budget would increase b

14、ike sales to 540 units.Should we authorize the requested increase in the advertising budget?,21,Changes in Fixed Costs and Sales Volume,Sales increased by $20,000, but profit before tax decreased by $2,000.,22,Changes

15、 in Fixed Costs and Sales Volume,The Shortcut Solution,23,Break-Even Analysis,Break-even analysis can be approached in three ways:Graphical analysis.Equation method.Contribution margin method.,24,Equation Method,Profi

16、t = Sales – (Variable expenses + Fixed expenses),Sales = Variable expenses + Fixed expenses + Profits,OR,At the break-even point profits equal zero.,,25,Break-Even Analysis,Here is the information from Wind Bicycle

17、Co.:,26,Equation Method,We calculate the break-even point as follows:,Sales = Variable expenses + Fixed expenses + Profits,$500Q = $300Q + $80,000 + $0Where: Q = Number of bikes sold $500 = Unit sell

18、ing price $300 = Unit variable expense $80,000 = Total fixed expense,27,Equation Method,We calculate the break-even point as follows:,Sales = Variable expenses + Fixed expenses + Profits,$500Q = $300Q + $80,000

19、+ $0$200Q = $80,000 Q = $80,000 ÷ $200 per bike Q = 400 bikes,28,Equation Method,We can also use the following equation to compute the break-even point in sales dollars.,Sales = Variable expenses +

20、 Fixed expenses + Profits,X = 0.60X + $80,000 + $0 Where: X = Total sales dollars 0.60 = Variable expenses as a % of sales $80,000 = Total fixed expenses,29,Equation Method,X = 0.60X + $80,000

21、 + $0 0.40X = $80,000 X = $80,000 ÷ 0.40 X = $200,000,We can also use the following equation to compute the break-even point in sales dollars.,Sales = Variable expenses + Fixed expenses

22、+ Profits,30,Contribution Margin Method,The contribution margin method is a variation of the equation method.,Fixed expenses CM ratio,=,Break-even point intotal sales dollars,,,31,Quick Check ?,Coffee Klatch is

23、an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold

24、 each month on average. What is the break-even sales in units?a. 872 cupsb. 3,611 cupsc. 1,200 cupsd. 1,150 cups,32,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average sell

25、ing price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold each month on average. What is the break-even sales in units?a

26、. 872 cupsb. 3,611 cupsc. 1,200 cupsd. 1,150 cups,,33,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable e

27、xpense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold each month on average. What is the break-even sales in dollars?a. $1,300b. $1,715c. $1,788d. $3,129,34,Quick Check ?,Coffee

28、 Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cu

29、ps are sold each month on average. What is the break-even sales in dollars?a. $1,300b. $1,715c. $1,788d. $3,129,,35,Target Profit Analysis,Suppose Wind Co. wants to know how many bikes must be sold to earn a profit

30、of $100,000. We can use our CVP formula to determine the sales volume needed to achieve a target net profit figure.,36,The CVP Equation,Sales = Variable expenses + Fixed expenses + Profits,$500Q = $300Q + $80,000

31、+ $100,000$200Q = $180,000 Q = 900 bikes,37,The Contribution Margin Approach,We can determine the number of bikes that must be sold to earn a profit of $100,000 using the contribution margin approach.,,38

32、,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per mont

33、h is $1,300. How many cups of coffee would have to be sold to attain a target profit of $2,500 per month?a. 3,363 cupsb. 2,212 cupsc. 1,150 cupsd. 4,200 cups,39,Quick Check ?,Coffee Klatch is an espresso stand in a

34、downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. How many cups of coffee would have to be

35、sold to attain target profits of $2,500 per month?a. 3,363 cupsb. 2,212 cupsc. 1,150 cupsd. 4,200 cups,,=,40,Effect of income tax,Tax is paid on profitThe CVP formulae use profit before taxNeed to convert a targe

36、t dollar profit after tax into the before tax amount by dividing it by 1 – the tax rate,41,Effect of income tax,42,Effect of income tax,We can determine the number of bikes that must be sold to earn an after tax profit

37、of $90,000 when the tax rate is 40%.,43,Changes in CVP variables,Changes in fixed costsWhen estimates of fixed costs are revised, the break-even point will change.A percentage increase in TFC will lead to a similar i

38、ncrease in the break-even point (in units or dollars).If TFC falls by $150 and the CM ratio is 0.4, break-even sales revenue will fall by150/0.4 i.e. by $375. Profit will fall by the same amount as the change in TF

39、C.,44,Changes in CVP variables,Different fixed costs may apply to different levels of sales volume – can have more than one break-even point. TR TC,,,,,,,,,45,Changes in CVP variables,Changes in the uni

40、t contribution marginA change in VC/unit will change the CM/unit and produce a new break-even point.An increase in the VC/unit will reduce the CM/unit and produce a higher break-even point.An increase in the sellin

41、g price per unit will increase the CM/unit and lower the break-even point.,46,Operating Leverage,A measure of how sensitive net operating income is to percentage changes in sales.With high leverage, a small percentage i

42、ncrease in sales can produce a much larger percentage increase in profit before tax,47,Operating Leverage,DOL =$100,000 $ 20,000,= 5,48,Operating Leverage,With a operating leverage of 5, if Wind increases its

43、 sales by 10%, its profit before tax would increase by 50%.,Here’s the verification!,49,Operating Leverage,10% increase in sales from$250,000 to $275,000 . . .,. . . results in a 50% increase inincome from $20,000 to $

44、30,000.,50,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expens

45、e per month is $1,300. 2,100 cups are sold each month on average. What is the operating leverage?a. 2.21b. 0.45c. 0.34d. 2.92,51,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The av

46、erage selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold each month on average. What is the operating leverage

47、?a. 2.21b. 0.45c. 0.34d. 2.92,,52,Quick Check ?,At Coffee Klatch the average selling price of a cup of coffee is $1.49, the average variable expense per cup is $0.36, and the average fixed expense per month is $1,300

48、. 2,100 cups are sold each month on average.If sales increase by 20%, by how much should profit before tax increase?a. 30.0%b. 20.0%c. 22.1%d. 44.2%,53,Quick Check ?,At Coffee Klatch the average selling price of a

49、cup of coffee is $1.49, the average variable expense per cup is $0.36, and the average fixed expense per month is $1,300. 2,100 cups are sold each month on average.If sales increase by 20%, by how much should net opera

50、ting income increase?a. 30.0%b. 20.0%c. 22.1%d. 44.2%,,54,To verify the increase in profit:,55,The Margin of Safety,Excess of budgeted (or actual) sales over the break-even volume of sales. The amount by which sales

51、can drop before losses begin to be incurred.,Margin of safety = Total sales - Break-even sales,Let’s calculate the margin of safety for Wind Bicycles.,56,The Margin of Safety,Wind has a break-even point of $200,000. I

52、f actual sales are $250,000, the margin of safety is $50,000 or 100 bikes.,57,The Margin of Safety,The margin of safety can be expressed as 20% of actual sales.($50,000 ÷ $250,000),,58,Quick Check ?,Coffee Klatch i

53、s an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are so

54、ld each month on average. What is the margin of safety?a. 3,250 cupsb. 950 cupsc. 1,150 cupsd. 2,100 cups,59,Quick Check ?,Coffee Klatch is an espresso stand in a downtown office building. The average selling pri

55、ce of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. 2,100 cups are sold each month on average. What is the margin of safety?a. 3,250 cupsb.

56、 950 cupsc. 1,150 cupsd. 2,100 cups,,60,The Concept of Sales Mix,Sales mix is the relative proportions in which a company’s products are sold.Different products have different selling prices, cost structures, and co

57、ntribution margins. Let’s assume Wind sells bikes and carts and see how we deal with break-even analysis.,61,Multi-product break-even analysis,Wind Bicycle Co. provides the following information:,$265,000 $550,000,

58、= 48.2% (rounded),,62,Multi-product break-even analysis,63,Assumptions underlying CVP analysis,The behaviour of total revenue is linearThe behaviour of total costs is linear over a relevant rangecosts can be categoris

59、ed as fixed, variable or semivariablelabour productivity, production technology and market conditions do not changethere are no capacity changes during the period under consideration,64,Assumptions underlying CVP analy

60、sis,For both variable and fixed costs, sales volume is the only cost driverThe sales mix remains constant over the relevant rangeIn manufacturing firms, levels of inventory at the beginning and end of the period are th

61、e same i.e. sales in units = production in units,65,Treating CVP analysis with caution,CVP analysis is merely a simplified modelThe usefulness of CVP analysis may be greater in less complex smaller firms For larger fir