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Cover
Accounting: What the Numbers Mean, 5/e
David H. Marshall, Millikin University
Wayne W. McManus, International College of the Cayman Islands
Daniel F. Viele, Webster University
Managerial Accounting and Cost-Volume-Profit Relationships

Chapter 12 Outine


Managerial Accounting Contrasted to Financial Accounting

  1. The Management Process
    1. Variety of firm's objectives.
    2. Planning and Control.
  2. Differences Between Financial and Managerial Accounting
    1. Future orientation.
    2. Breadth of focus.
    3. Application of Generally Accepted Accounting Principles.

Cost Classifications

  1. Relationship of Cost to Volume of Activity
    1. Cost behavior patterns.
      1. Variable cost.
      2. Fixed cost.
      3. Mixed cost.
    2. Variable costs as activity changes.
      1. Change in total as activity changes.
      2. Constant per unit.
    3. Fixed costs as activity changes.
      1. Fixed in total as activity changes.
      2. Fixed per unit - never unitize fixed costs!

Applications of Cost-Volume-Profit Analysis

  1. Cost Behavior Pattern: The Key
    1. Assumptions.
      1. Relevant range.
      2. Linearity.
  2. Estimating Cost Behavior Patterns
    1. Scattergram.
    2. Variable rate.
    3. Cost formula.

Contribution Margin

  1. Contribution Margin Format Income Statement
    1. Functional cost categories reclassified to cost behavior categories.
    2. Analyzing impact of volume changes on net income.
  2. Expanded Contribution Margin Model
    1. Use of model to answer "what if" questions.
  3. Contribution Margin Ratio
    1. Determine the change in contribution margin and net income for a change in revenues.
    2. Determine the revenue increase needed to cover an increase in fixed expenses.
    3. Used when per unit revenue and variable expense data are not available.
  4. Sales Mix
  5. Break-Even Point Analysis
    1. Sales volume in units and/or dollars.
    2. Graphical presentation.
  6. Operating Leverage
    1. Indifference point.








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