成本與管理會(huì)計(jì)（第16版）課件匯 亨格瑞 第1-12章 The Manager and Management Accounting-Decision-Making and Relevant Information

CostAccountingSeventeenthEdition,GlobalEditionChapter1TheManagerandManagementAccountingLearningObjectives(1of2)1.1Distinguishfinancialaccountingfrommanagementaccounting1.2

Understandhowmanagementaccountantshelpfirmsmakestrategicdecisions1.3Describethesetofbusinessfunctionsinthevaluechainandidentifythedimensionsofperformancethatcustomersareexpectingofcompanies1.4

Explainthefive-stepdecision-makingprocessanditsroleinmanagementaccountingLearningObjectives(2of2)1.5Describethreeguidelinesmanagementaccountantsfollowinsupportingmanagers1.6Understandhowmanagementaccountingfitsintoanorganization’sstructure1.7UnderstandwhatprofessionalethicsmeantomanagementaccountantsAccountingDisciplineOverview

(1of3)Managementaccounting

measures,analyzes,andreportsfinancialandnonfinancialinformationthathelpsmanagersmakedecisionstofulfillorganizationalgoals.ManagementaccountingneednotbeGAAPcompliant.Managersusemanagementaccountinginformationto:Develop,communicate,andimplementstrategiesCoordinateproductdesign,production,andmarketingdecisionsandevaluateacompany’sperformanceAccountingDisciplineOverview

(2of3)Financialaccounting

focusesonreportingfinancialinformationtoexternalpartiessuchasinvestors,governmentalagencies,banks,andsuppliers,basedonGAAP.CostAccounting

measures,analyzes,andreportsfinancialandnonfinancialinformationrelatedtothecostsofacquiringorusingresourcesinanorganization.AccountingDisciplineOverview

(3of3)Today,mostaccountingprofessionalstaketheperspectivethatcostinformationispartoftheinformationcollectedtomakemanagementdecisions;therefore,thedistinctionbetweenthetwoisnotclear-cut,andinyourbookandthesePowerPointpresentations,weoftenusethetermsinterchangeably.MajorDifferencesBetweenManagementandFinancialAccounting

(1of2)Exhibit1.1MajorDifferenceBetweenManagementandFinancialAccountingManagementAccountingFinancialAccountingPurposeofinformationHelpmanagersmakedecisionstofulfillanorganization’sgoalsCommunicateanorganization’sfinancialpositiontoinvestors,banks,regulators,andotheroutsidepartiesPrimaryusersManagersoftheorganizationExternaluserssuchasinvestors,banks,regulators,andsuppliersFocusandemphasisFuture-oriented(budgetfor2020preparedin2019)Past-oriented(reportson2019performancepreparedin2020)RulesofmeasurementandreportingInternalmeasuresandreportsdonothavetofollowGAAPbutarebasedoncost-benefitanalysesFinancialstatementsmustbepreparedinaccordancewithGAAPandbecertifiedbyexternal,independentauditorsMajorDifferencesBetweenManagementandFinancialAccounting(2of2)ManagementAccountingFinancialAccountingTimespanandtypeofreportsVariesfromhourlyinformationto15to20years,withfinancialandnonfinancialreportsonproducts,departments,territories,andstrategiesAnnualandquarterlyfinancialreports,primarilyonthecompanyasawholeBehavioralimplicationsDesignedtoinfluencethebehaviorofmanagersandotheremployeesPrimarilyreportseconomiceventsbutalsoinfluencesbehaviorbecausemanager’scompensationisoftenbasedonreportedfinancialresultsStrategicDecisionsandtheManagementAccountant(1of2)Strategyspecifieshowanorganizationmatchesitsowncapabilitieswiththeopportunitiesinthemarketplace.Therearetwobroadstrategies:costleadershipandproductdifferentiation.Strategiccostmanagementdescribescostmanagementthatspecificallyfocusesonstrategicissues.StrategicDecisionsandtheManagementAccountant(2of2)Managementaccountinginformationhelpsmanagersformulatestrategybyansweringquestionssuchasthefollowing:Whoareourmostimportantcustomers,andwhatcriticalcapabilitydowehavetobecompetitiveanddelivervaluetoourcustomers?Whatisthebargainingpowerofourcustomers?Whatisthebargainingpowerofoursuppliers?Whatsubstituteproductsexistinthemarketplace,andhowdotheydifferfromourproductintermsoffeatures,price,cost,andquality?Willadequatecashbeavailabletofundthestrategy,orwilladditionalfundsneedtoberaised?Value-ChainandSupply-ChainAnalysisandKeySuccessFactors(1of2)Creatingvalueisanimportantpartofplanningandimplementingstrategy.Valueistheusefulnessacustomergainsfromacompany’sproductorservice.Theentirecustomerexperiencedeterminesthevalueacustomerderivesfromaproduct.Value-ChainandSupply-ChainAnalysisandKeySuccessFactors(2of2)Thevaluechainisthesequenceofbusinessfunctionsbywhichaproductismadeprogressivelymoreusefultocustomers.Thevaluechainconsistsofthefollowing:ResearchandDevelopmentDesignofProductsandProcessesProductionMarketing(includingSales)DistributionCustomerServiceTheValueChainIllustratedExhibit1.2DifferentPartsoftheValueChainCustomerRelationshipManagement(CRM)CRMisastrategythatintegratespeopleandtechnologyinallbusinessfunctionstodeepenrelationshipswithcustomers,partners,anddistributors.CRMinitiativestheuseoftechnologytocoordinateallcustomer-facingactivitiesanddesignandproductionactivitiesnecessarytogetproductstocustomers.Supply-ChainAnalysisProductionandDistributionarethepartsofthevaluechainassociatedwithproducinganddeliveringaproductorservice.ThesetwofunctionstogetherareknownastheSupplyChain.Thesupplychaindescribestheflowofgoods,services,andinformationfromtheinitialsourcesofmaterials,services,andinformationtotheirdelivery,regardlessofwhethertheactivitiesoccurinoneorganizationorinmultipleorganizations.SupplyChainIllustratedExhibit1.3SupplyChainforaColaBottlingCompanyKeySuccessFactorsCustomerswantcompaniestousethevaluechainandsupplychaintodeliverever-improvinglevelsofperformancewhenitcomestoseveral(orevenall)ofthefollowing:CostandEfficiencyQualityTimeInnovationSustainabilityKeySuccessFactors—SustainabilityTheinterestinsustainabilityappearstobeintensifyingamongcompaniesforseveralreasons:Manyinvestorscareaboutsustainability.Companiesarefindingthatsustainabilitygoalsattractandinspireemployees.Customersprefertheproductsofcompanieswithgoodsustainabilityrecordsandboycottcompanieswithpoorsustainabilityrecords.Societyandactivistnongovernmentalorganizationsmonitorthesustainabilityperformanceoffirmsandtakelegalactionagainstthosethatviolateenvironmentallaws.Decision-Making,Planning,andControl:TheFive-StepDecision-MakingProcessIdentifytheproblem/uncertainties.Obtaininformation.Makepredictionsaboutthefuture.Makedecisionsbychoosingamongalternatives.Implementthedecision,evaluateperformance,andlearn.PlanningandControlSystems(1of2)Planningconsistsofselectinganorganization’sgoalsandstrategies,predictingresultsundervariousalternativewaysofachievingthosegoals,decidinghowtoattainthedesiredgoals,andcommunicatingthegoalsandhowtoachievethemtotheentireorganization.Managementaccountantsserveasbusinesspartnersintheseplanningactivitiesbecausetheyunderstandthekeysuccessfactorsandwhatcreatesvalue.PlanningandControlSystems(2of2)Controlcomprisestakingactionsthatimplementtheplanningdecisions,evaluatingpastperformance,andprovidingfeedbackandlearningtohelpfuturedecisionmaking.Themostimportantplanningtoolwhenimplementingstrategyisabudget.Abudgetisthequantitativeexpressionofaproposedplanofactionbymanagementandisanaidtocoordinatingwhatneedstobedonetoexecutethatplan.PlanningandControlSystemsIllustratedExhibit1.5HowAccountingAidsDecision-MakingatDailyNewsManagementAccountingGuidelinesThreeguidelineshelpmanagementaccountantsprovidethemostvaluetothestrategicandoperationaldecision-makingoftheircompanies:Thecost-benefitapproachcomparesthebenefitsofanaction/purchasetothecosts.Generally,ofcourse,thebenefitsshouldexceedthecosts.Behavioralandtechnicalconsiderationsrecognize,amongotherthings,thatmanagementisprimarilyahumanactivitythatshouldfocusonencouragingindividualstodotheirjobsbetter.Managersusealternativewaystocomparecostsindifferentdecision-makingsituationsbecausetherearedifferentcostsfordifferentpurposes.LineandStaffRelationshipsOrganizationsdistinguishbetweenlinemanagementandstaffmanagement.Linemanagementisdirectlyresponsibleforachievingthegoalsoftheorganization.Staffmanagementprovidesadvice,support,andassistancetolinemanagement.OrganizationalStructureandtheManagementAccountantExhibit1.6OrganizationalStructureandtheManagementAccountantManagementAccountingBeyondtheNumbersThesuccessfulmanagementaccountantpossessesseveralskillsandcharacteristicsthatreachwellbeyondbasicanalyticalabilities.Forexample,managementaccountantsmustdothefollowing:Workwellincross-functionalteamsandasabusinesspartnerPromotefact-basedanalysisandmaketough-minded,criticaljudgmentswithoutbeingadversarialLeadandmotivatepeopletochangeandbeinnovativeCommunicateclearly,openly,andcandidlyHavehighintegrityProfessionalEthicsTheInstituteofManagementAccountants(IMA)hasadvancedfourstandardsofethicalconductformanagementaccountants:CompetenceConfidentialityIntegrityCredibilitySarbanes-OxleyAct(SOX)TheSarbanes-Oxleylegislationwaspassedin2002inresponsetoaseriesofcorporatescandals.Theactfocusesonimprovingthefollowing:InternalcontrolsCorporategovernanceMonitoringofmanagersDisclosurepracticesofpubliccompaniesTermstoLearn(1of2)BudgetDesignofproductsandprocessesChieffinancialofficerDistributionControlFinancedirectorControllerFinancialaccountingCostaccountingLearningCost-benefitapproachLinemanagementCostmanagementManagementaccountingCustomerrelationshipmanagement(CRM)MarketingCustomerservicePlanningTermstoLearn(2of2)ProductionResearchanddevelopment(R&D)StaffmanagementStrategiccostmanagementStrategySupplychainSustainabilityTotalqualitymanagement(TQM)ValuechainCostAccountingSeventeenthEdition,GlobalEditionChapter2AnIntroductiontoCostTermsandPurposesCopyright?2021PearsonEducationLtd.LearningObjectives(1of2)2.1Defineandillustrateacostobject2.2

Distinguishbetweendirectcostsandindirectcosts2.3Explainvariablecostsandfixedcosts2.4

Interpretunitcostscautiously2.5

Distinguishthefinancialaccountingconcepts,inventoriablecosts,andperiodcostsLearningObjectives(2of2)2.6

Illustratetheflowofinventoriableandperiodcostsinfinancialaccounting2.7Explainwhyproductcostsarecomputedindifferentwaysfordifferentpurposes2.8Describeaframeworkforcostaccountingandcostmanagement.BasicCostTerminology(1of2)Cost—asacrificedorforgoneresourcetoachieveaspecificobjectiveActualcost—acostthathasoccurredBudgetedcost—apredictedcostCostobject—anythingforwhichacostmeasurementisdesiredCostObjectExamplesatTeslaExhibit2.1ExamplesofCostObjectsatTeslaCostObjectIllustrationProductATeslaModel3vehicleServiceTelephonehotlineprovidinginformationandassistancetoTeslastoresandgalleriesProjectR&DprojectonanelectricTeslatruckCustomerTheDubaiRoadandTransportAuthority(RTA),whichisbuildingalargefleetofelectrictaxisinthecityActivitySettingupmachinesforproductionormaintainingproductionequipmentDepartmentWorkerhealthandsafetydepartmentBasicCostTerminology(2of2)CostAccumulation—thecollectionofcostdatainanorganizedwaybymeansofanaccountingsystemCostAssignment—ageneraltermthatencompassesthegatheringofaccumulatedcoststoacostobjectintwoways:TracingcostswithadirectrelationshiptothecostobjectAllocatingaccumulatedcostswithanindirectrelationshiptoacostobjectDirectandIndirectCostsDirectcostscanbeconvenientlyandeconomicallytraced(tracked)toacostobject.Indirectcostscannotbeconvenientlyoreconomicallytraced(tracked)toacostobject.Insteadofbeingtraced,thesecostsareallocatedtoacostobjectinarationalandsystematicmanner.CostAssignmenttoaCostObject(TeslaExample)Exhibit2.2

CostAssignmenttoaCostObjectCostAllocationChallengesDirectCostsMaterial(steelortiresforacar,asanexample)Labor(assembly-lineworkerwages)IndirectCostsElectricityRentPropertytaxesPlantadministrationexpensesFactorsAffectingDirect/IndirectCostClassificationsThematerialityofthecostinquestionTheavailableinformation-gatheringtechnologyDesignofoperationsNOTE:aspecificcostmaybebothadirectcostofonecostobjectandanindirectcostofanothercostobject.Thedirect/indirectclassificationdependsonthecostobjectthatoneistryingtodeterminethecostof.CostBehaviorPatterns:VariableCostsandFixedCosts(1of2)Variablecostschange,intotal,inproportiontochangesintherelatedlevelofactivityorvolumeofoutputproduced.Fixedcostsremainunchanged,intotal,foragiventimeperiod,despitechangesintherelatedlevelofactivityorvolumeofoutputproduced.Costsarefixedorvariableforaspecificactivityand/orforagiventimeperiod.CostBehaviorPatterns:VariableCostsandFixedCosts(2of2)Variablecostsareconstantonaper-unitbasis.Thatis,ifaproducttakes5poundsofmaterialeach,itstaysthesameperunitregardlessifone,ten,orathousandunitsareproduced.Fixedcostsperunitchangeinverselywiththelevelofproduction.Asmoreunitsareproduced,thesamefixedcostisspreadovermoreandmoreunits,reducingthecostperunit.CostBehaviorSummarizedCOSTSTOTALDOLLARSCOSTPERUNITVARIABLECOSTSChangeinproportionwithoutput(moreoutput=morecost)UnchangedinrelationtooutputFIXEDCOSTSUnchangedinrelationtooutput(withintherelevantrange)Changeinverselywithoutput(moreoutput=lowercostperunit)GraphsofVariableandFixedCostsExhibit2.3

GraphsofVariableandFixedCostsOtherCostConceptsMixedcostshavebothfixedandvariableelements.Costdriver—avariable,suchasthelevelofactivityorvolume,thatcausallyaffectscostsoveragiventimespanRelevantrange—thebandorrangeofnormalactivitylevel(orvolume)inwhichthereisaspecificrelationshipbetweenthelevelofactivity(orvolume)andthecostinquestionFixedcostsareconsideredfixedonlywithintherelevantrange.IllustrationofFixedCostWithinRelevantRangeExhibit2.4ThomasTransportCompanyMultipleClassificationsofCostsCostsmaybeclassifiedasDirect/Indirectand Variable/Fixed.Thesemultipleclassificationsgiverisetoimportantcostcombinations:DirectandvariableDirectandfixedIndirectandvariableIndirectandfixedExamplesoftheMultipleClassificationsofCostsExhibit2.5ExamplesofCostsinCombinationsoftheDirect/IndirectandVariable/FixedCostClassificationsforaCarManufacturerUseUnitCostsCautiouslyAlthoughunitcostsareregularlyusedinfinancialreportsandformakingproductmixandpricingdecisions,managersshouldthinkintermsoftotalcostsratherthanunitcostsformanydecisions.TheThreeDifferentSectorsofEconomyManufacturing-sectorcompaniespurchasematerialsandcomponentsandconvertthemintovariousfinishedgoods.Merchandising-sectorcompaniespurchaseandthenselltangibleproductswithoutchangingtheirbasicform.Service-sectorcompaniesprovideservices(intangibleproducts)likelegaladviceoraudits.TypesofInventoryinManufacturingDirectmaterials—resourcesin-stockandavailableforuseWork-in-process(orprogress)—goodspartiallyworkedonbutnotyetcompleted,oftenabbreviatedasWIPFinishedgoods—goodscompletedbutnotyetsoldNote:Merchandising-sectorcompaniesholdonlyonetypeofinventory:MerchandiseInventoryCommonlyUsedClassificationsofManufacturingCostsAlsoknownasinventoriablecosts:Directmaterials—acquisitioncostsofallmaterialthatwillbecomepartofthecostobjectDirectlabor—compensationofallmanufacturinglaborthatcanbetracedtothecostobjectIndirectmanufacturing—allmanufacturingcoststhatarerelatedtothecostobjectbutcannotbetracedtothatcostobjectinaneconomicallyfeasiblewayInventoriableCostsVersusPeriodCostsInventoriablecostsareallcostsofaproductthatareconsideredassetsinacompany’sbalancesheetwhenthecostsareincurredandthatareexpensedascostofgoodssoldonlywhentheproductissold.Formanufacturingcompanies,allmanufacturingcostsareinventoriablecosts.Periodcostsareallcostsintheincomestatementotherthancostofgoodssold.Theyaretreatedasexpensesoftheaccountingperiodinwhichtheyareincurred.CostFlowsTheCostofGoodsManufacturedandtheCostofGoodsSoldsectionoftheincomestatementareaccountingrepresentationsoftheactualflowofcoststhroughaproductionsystem.Note:Inventoriablecostsgothroughthebalancesheetaccountsofdirectmaterials,work-in-process,andfinishedgoodsinventorybeforeenteringthecostofgoodsoldintheincomestatement.CostFlowsIllustratedExhibit2.7FlowofRevenueandCostsforaManufacturing-SectorCompany,CellularProducts(inthousands)Multiple-StepIncomeStatement

(1of2)Exhibit2.8IncomeStatementandScheduleofCostofGoodsManufacturedofaManufacturing-SectorCompany,CellularProductsMultiple-StepIncomeStatement

(2of2)Exhibit2.8IncomeStatementandScheduleofCostofGoodsManufacturedofaManufacturing-SectorCompany,CellularProductsFlowofRevenuesandCostsforaMerchandisingCompanyExhibit2.10FlowofRevenuesandCostsforaMerchandisingCompany(RetailerorWholesaler)OtherCostConsiderationsPrimecostisatermreferringtoalldirectmanufacturingcosts(materialsandlabor).Conversioncostisatermreferringtodirectlaborandindirectmanufacturingcosts.Overtimepremiumlaborcostsareconsideredpartofindirectoverheadcosts.Idletimereferstothewagespaidforunproductivetimecausedbylackoforders,machineorcomputerbreakdown,workdelays,poorscheduling,andthelike.MeasuringCostsRequiresJudgmentBecausemanagementcandefineandclassifycostsinmultipleways,judgmentisrequired.Managers,accountants,suppliers,andothersshouldagreeontheclassificationsandmeaningofthecosttermsintroducedinthischapterandthroughoutthebook.DifferentProductCostsforDifferentPurposes(1of2)Pricingandproduct-mixdecisions—decisionaboutpricingandmaximizingprofitsContractingwithgovernmentagencies—veryspecificdefinitionsofallowablecostsfor“costplusprofit”contractsPreparingexternal-usefinancialstatements—GAAP-drivenproductcostsonlyDifferentProductCostsforDifferentPurposes(2of2)Exhibit2.11DifferentProductCostsforDifferentPurposesAFrameworkforCostAccountingandCostManagementThefollowingthreefeaturesofcostaccountingandcostmanagementcanbeusedforawiderangeofapplications(forhelpingmanagersmakedecisions):Calculatingthecostofproducts,services,andothercostobjectsObtaininginformationforplanningandcontrolandperformanceevaluationAnalyzingtherelevantinformationformakingdecisionsTermstoLearn(1of2)ActualcostDirectcostsofacostobjectAveragecostDirectmanufacturinglaborcostsBudgetedcostDirectmaterialcostsConversioncostsDirectmaterialsinventoryCostFactoryoverheadcostsCostaccumulationFinishedgoodsinventoryCostallocationFixedcostsCostassignmentIdletimeCostdriverIndirectcostsofacostobjectCostobjectIndirectmanufacturingcostsCostofgoodsmanufacturedInventoriablecostsCosttracingManufacturingoverheadcostsTermstoLearn(2of2)Merchandising-sectorcompaniesOperatingincomeOvertimepremiumPeriodcostsPrimecostsProductcostRelevantrangeRevenuesService-sectorcompaniesUnitcostVariablecostWork-in-processinventoryWork-in-processCostAccountingSeventeenthEdition,GlobalEditionChapter3Cost-Volume-ProfitAnalysisCopyright?2021PearsonEducationLtd.LearningObjectives(1of2)1.1Explainthefeaturesofcost-volume-profit(CVP)analysis1.2

Determinethebreakevenpointandoutputlevelneededtoachieveatargetoperatingincome1.3UnderstandhowincometaxesaffectCVPanalysis1.4

ExplainhowmanagersuseCVPanalysistomakedecisions1.5ExplainhowsensitivityanalysishelpsmanagerscopewithuncertaintyLearningObjectives(2of2)1.6UseCVPanalysistoplanvariableandfixedcosts1.7ApplyCVPanalysistoacompanyproducingmultipleproducts1.8ApplyCVPanalysisinserviceandnot-for-profitorganizations1.9DistinguishcontributionmarginfromgrossmarginEssentialsofCostVolumeProfit(CVP)Analysis Managerswanttoknowhowprofitswillchangeastheunitssoldofaproductorservicechanges.Managersliketouse“what-if”analysistoexaminethepossibleoutcomesofdifferentdecisionssotheycanmakethebestone.InChapter2,wediscussedtotalrevenues,totalcostsandincome.Inthischapter,wetakeacloserlookattherelationshipamongtheelements(sellingprice,variablecosts,fixedcosts).AFive-StepDecision-MakingProcessinPlanningandControl-RevisitedIdentifytheproblem/uncertainties.Obtaininformation.Makepredictionsaboutthefuture.Makedecisionsbychoosingbetweenalternativesusingcost-volume-profit(CVP)analysis.Implementthedecision,evaluateperformance,andlearn.FoundationalAssumptionsUsedinCVPAnalysis(1of2)Changesinproduction/salesvolumearethesolecauseforcostandrevenuechanges.Totalcostsconsistoffixedcostsandvariablecosts.Revenueandcostsbehaveandcanbegraphedasalinearfunction(astraightline).FoundationalAssumptionsUsedinCVPAnalysis(2of2)Sellingprice,variablecostperunit,andfixedcostsareallknownandconstant.Inmanycases,onlyasingleproductwillbeanalyzed.Ifmultipleproductsarestudied,theirrelativesalesproportionsareknownandconstant.Thetimevalueofmoney(interest)isignored.BasicCVPEquationsContributionMargin(1)=TotalRevenue–TotalVariableCostsContributionMarginperunit=SellingPrice–VariableCostPerUnitContributionMargin(2)=ContributionMarginperUnitx#ofUnitsSoldOperatingIncome=ContributionMargin–FixedCostsContributionMarginRatio(orPercentage)=ContributionMargin/RevenueMoreCVPRelationshipsManipulationofthebasicequations(priorslide)yieldsanextremelyimportantandpowerfultoolcalledContributionMargin.Contributionmarginequalsrevenuelessvariablecosts.Contributionmarginperunitequalsunitsellingpricelessunitvariablecosts,butitcanalsobedeterminedbytakingcontributionmargindividedbynumberofunitssold.Cost-Volume-Profit:EquationandContributionMarginMethods(1of2)EquationMethod:Revenue–VariableCosts–FixedCosts=OperatingIncomeCMMethod:Where:[(SPxQ)–(VCxQ)]–

FC=OIRevenue=(SPxQ):SellingPrice(SP)*QuantityofUnitsSold(Q)Cost-Volume-Profit:EquationandContributionMarginMethods(2of2)VariableCosts=(VCxQ):=UnitVariableCosts(VC)*QuantityOfUnitsSold(Q)ContributionMargin(CM)=Revenue–VariableCostsOperatingIncome(OI)=ContributionMargin–FixedCosts(FC)Cost-Volume-Profit—YouTryIt!ProblemREVENUE–VARIABLE–FIXED=OPERATING

COSTSCOSTSINCOMETiny’sCabinetssellscabinetsfor$600each.Variablecostis$350each.Annualfixedcostsare$20,000.IfTinysells100cabinets,whatishisoperatingincome(OI)?Cost-Volume-Profit—YouTryIt!SolutionTiny’sCabinetssellscabinetsfor$600each.Variablecostis$350each.Annualfixedcostsare$20,000.IfTinysells100cabinets,whatithisoperatingincome(OI)?Solution:[(SPxQ)–(VCxQ)]–

FC=OI($600*100)–($350*100)=ContributionMargin$60,000–$35,000=$25,000(CM);CM–$20,000=OperatingIncome(OI)$60,000–$35,000–$20,000=$5,000(OI)BreakevenPointThebreakevenpoint(BEP)isthatquantityofoutputsoldatwhichtotalrevenueequalstotalcost;thatis,thequantityofoutputsoldresultsin$0.00ofoperatingincomeorwhereOI=$0Recallourcontributionmarginmethodequation:[(SPxQ)–

VCxQ)]–

FC=OIIfwesetOIto0andsolve,we’llgettheBEP.BreakevenPointExample(1of2)Let’strythisforTiny’sCabinets.RecallthathisSP=$600,VC=$350,andFixedCostsare$20,000,annually.AtwhatQ(quantity)wouldTinybreakeven?[(SPxQ)–(VCxQ)]–

FC=OI($600xQ)–($350xQ)–$20,000=0$250xQ=20,000Q=80AnotherwaytofindtheansweristouseCM:Breakevenrevenues=FC/CM%Breakevenunits=FC/CMperunitBreakevenPointExample(2of2)Let’strythisforTiny’sCabinets.RecallthathisSP=$600,VC=$350,andFixedCostsare$20,000.Here’sanotherwaytofindtheanswer:Breakevenrevenues=FC/CMperunitTiny’sCMperunit=$600–$350=$250Tiny’sCM%=$250/$600=41.67%$20,000/$250=80Or,inrevenues$20,000/41.67%=$47,996,whichisequalto80x$600,allowingforrounding.BreakevenPointExtended:ProfitPlanning/TargetIncomeThebreakevenformulacanbemodifiedtobecomeaprofitplanningtoolbyaddingtargetoperatingincometofixedcostsinthenumerator.Let’ssaythatTinywantstomake$30,000OperatingIncome:Q(QtyofUnits)=(FC+TargetOperatingIncome)/CMperunitQ=($20,000+$30,000)/$250Q=200CVP:GraphicallyExhibit3.2Profit-VolumeGraphforGMATSuccessCVPandIncomeTaxesAfter-taxprofit(NetIncome)canbecalculatedby:NetIncome=OperatingIncome*(1–

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