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Cost Volume Profit Relationships
08-25-2009, 07:35 PM
Post: #1
Cost Volume Profit Relationships
Break-even Point

The level of activity at which an organization neither earns a profit nor incurs a loss. The break-even point can also be defined as the point where total revenue equals total costs and as the point where total contribution margin equals total fixed costs.

Contribution Margin Ratio

The contribution margin per unit expressed as a percentage of the selling price per unit. This term is synonymous with profit-volume ratio.

Degree of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales volume unit will effect profits. The degree of operating leverage is computed by dividing contribution margin by net income.

Margin of Safety

The excess of budgeted (or actual) sales over the break-even volume of sales.

Operating Leverage

A measure of the extent to which fixed costs are being used in an organization. The greater the fixed costs, the greater is the operating leverage available and the greater is the sensitivity of net income to change in sales.

Some Assumptions of CVP

In a given future time period
1. Variable cost and sales price per unit will remain unchanged.
2. Fixed cost per period will remain unchanged i.e. business will be operated in a relevant range.
3. No of units produced will be equal to no of units sold.
4. Purchasing power of money will remain unchanged.
5. The production and sales of one division of a company will not affect production and sales on an other division of same company.
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08-26-2009, 01:41 PM
Post: #2
 
good work
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08-28-2009, 05:48 PM
Post: #3
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />good work
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Thanks sir,

Please guide me further.
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08-29-2009, 02:46 PM
Post: #4
 
Dear Shahid, Which book of Cost and Management Accounting do you use?
Following are the names of some very useful books of cost and management accounting
1.Cost Accountign by Matz Usry
2.Cost and Management Accounting by Colin Dury
3.Advanced Cost and Management Accounting by S.P Jain and K.L Narang

Regards,

Awais Aftab
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08-31-2009, 04:26 PM
Post: #5
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />Dear Shahid, Which book of Cost and Management Accounting do you use?
Following are the names of some very useful books of cost and management accounting
1.Cost Accountign by Matz Usry
2.Cost and Management Accounting by Colin Dury
3.Advanced Cost and Management Accounting by S.P Jain and K.L Narang

Regards,

Awais Aftab
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear sir I used the "Managerial Accounting" by "Garrison" because our great teacher recommend this book for us.
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08-31-2009, 05:12 PM
Post: #6
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by shahid amin</i>
<br /><blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />Dear Shahid, Which book of Cost and Management Accounting do you use?
Following are the names of some very useful books of cost and management accounting
1.Cost Accountign by Matz Usry
2.Cost and Management Accounting by Colin Dury
3.Advanced Cost and Management Accounting by S.P Jain and K.L Narang

Regards,

Awais Aftab
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear sir I used the "Managerial Accounting" by "Garrison" because our great teacher recommend this book for us.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

I think you are talking about the book of Managerial accounting by Garrision and Eric Noreen. M I right? Its also a good book.
In which university do you read?
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09-01-2009, 05:40 PM
Post: #7
 
Yes sir! you r right.

Sir I am studying in "The Islamia University of Bahawalpur",
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09-02-2009, 03:41 PM
Post: #8
 
Its mean my prediction was right. Actually I live in Islamabad. Here the people of every area of Pakistan live. One of my english teacher who taught us english in F.SC belongs from Bhawalpur and he did his M.A English from Islamia University Bhawalpur.
Some teachers play a more constuctive role in the life of a student. He is one teacher who played a vital role in my life. Now I am communicating in English this is due to his teaching.
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09-03-2009, 03:21 PM
Post: #9
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />Its mean my prediction was right. Actually I live in Islamabad. Here the people of every area of Pakistan live. One of my english teacher who taught us english in F.SC belongs from Bhawalpur and he did his M.A English from Islamia University Bhawalpur.
Some teachers play a more constuctive role in the life of a student. He is one teacher who played a vital role in my life. Now I am communicating in English this is due to his teaching.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Yes sir,that's great
My teachers also play a vital role in my study as well as my carrier.
I really impressed them.
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09-03-2009, 04:44 PM
Post: #10
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by shahid amin</i>
<br />Break-even Point

The level of activity at which an organization neither earns a profit nor incurs a loss. The break-even point can also be defined as the point where total revenue equals total costs and as the point where total contribution margin equals total fixed costs.

Contribution Margin Ratio

The contribution margin per unit expressed as a percentage of the selling price per unit. This term is synonymous with profit-volume ratio.

Degree of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales volume unit will effect profits. The degree of operating leverage is computed by dividing contribution margin by net income.

Margin of Safety

The excess of budgeted (or actual) sales over the break-even volume of sales.

Operating Leverage

A measure of the extent to which fixed costs are being used in an organization. The greater the fixed costs, the greater is the operating leverage available and the greater is the sensitivity of net income to change in sales.

Some Assumptions of CVP

In a given future time period
1. Variable cost and sales price per unit will remain unchanged.
2. Fixed cost per period will remain unchanged i.e. business will be operated in a relevant range.
3. No of units produced will be equal to no of units sold.
4. Purchasing power of money will remain unchanged.
5. The production and sales of one division of a company will not affect production and sales on an other division of same company.

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

nice Mr shahid ..good work keep it up
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09-09-2009, 05:09 PM
Post: #11
 
thanks mr.tariq
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