Loading acctg211..

Introduction

Businesses are concerned with events that may impact their profitability. The study of cost behavior will enable management to make decisions in a proactive manner, rather than a reactive one, so that the company can remain profitable. The study of cost behavior also involves an understanding of the relationships among the different types of costs, the volume of sales, and the profits that are generated as these relationships change. The relationships are illustrated by the cost–volume–profit (CVP) analysis, which identifies how changes in the variables can enhance or impede profitability for the company.

Lesson Objectives

After completing this lesson, you should be able to do the following things:

• Identify variable, fixed, and mixed costs.
• Determine the fixed components of a mixed cost.
• Calculate the contribution margin and unit contribution margin.
• Determine required sales to break even or meet target profits.
• Determine the breakeven point for multiple product sales.
• Identify the consequences of changes to the components of the CVP relationship.

Lesson Readings and Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 12 Course Schedule.