Explain how changes in activity affect contribution margin and net operating income.
Prepare and interpret a cost-volume-profit (CVP) graph and a profit graph.
Use the contribution margin ratio (CM ratio) to compute changes in contribution margin and net operating income resulting from changes in sales volume.
Show the effects on net operating income of changes in variable costs, fixed costs, selling price, and volume.
Determine the level of sales needed to achieve a desired target profit.
Determine the break-even point.
Compute the margin of safety and explain its significance.
Compute the degree of operating leverage at a particular level of sales and explain how it can be used to predict changes in net operating income.
Compute the break-even point for a multiproduct company and explain the effects of shifts in the sales mix on contribution margin and the break-even point.