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Profit Planning: An Overview

Profit Planning: An Overview. Chapter 2 Managerial Accounting Concepts and Empirical Evidence. Profit. Units. Fixed Costs. Price. Variable Unit Costs. Basics of Profit Planning. Costs. Revenues. Basics of Profit Planning. Cost-Volume-Profit Relationship. $. Fixed Costs. FC.

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Profit Planning: An Overview

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  1. Profit Planning:An Overview Chapter 2 Managerial Accounting Concepts and Empirical Evidence

  2. Profit Units Fixed Costs Price Variable Unit Costs Basics of Profit Planning Costs Revenues

  3. Basics of Profit Planning

  4. Cost-Volume-Profit Relationship $ Fixed Costs FC Quantity ‘X’

  5. Variable Cost / Unit Total Variable Cost Cost-Volume-Profit Relationship $ TVC = VC*X FC X

  6. Cost-Volume-Profit Relationship $ Total Costs TC = TVC + FC TVC FC X

  7. Price Total Revenues Breakeven Units Cost-Volume-Profit Relationship $ TR = P*X TC TVC FC X X BE

  8. Profit Line p Profits p = TR - TC = P*X-VC*X - FC X BE -FC

  9. Contribution Margin Analysis Revenue - TVC = CM 1,250,000 - 620,000 = 630,000

  10. Contribution Margin Analysis CM - FC = Profits 50,000 - 100,000 = - 50,000

  11. Contribution Margin Analysis

  12. Non-Linear Cost-Volume-Profit Analysis $ Total Revenue X

  13. TotalCosts X2 X3 X1 Non-Linear Cost-Volume-Profit Analysis $ Total Revenue X

  14. Relevant Range Concept $ XU= Upper Bound TR TC XL = Lower Bound TVC FC X L X BE X U X

  15. Relevant Range Relevant Range Concept $ TR TC TVC FC X L X BE X U X

  16. Mean profit Mean Units Profit Line & Uncertainty Profits p = (P-VC)*X - FC p p X BE X -FC

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