Bài giảng môn Kế toán, kiểm toán - Chapter 12: Managerial accounting and cost – volume – profit relationships

© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Chapter 12Managerial Accounting and Cost–Volume–Profit RelationshipsPowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPAL O 1The Management Process12-3Managerial Accounting versus Financial AccountingManagerial accountingsupports the internalplanning (future-oriented)decisions made by management.Financial accounting hasmore of a scorekeeping,historical orientationthat provides informationto owners and othersoutside the organization.L O 212-4Managerial Accounting versus Financial AccountingL O 212-5Relationship of Total Costto Volume of Activity How a cost will react to changes in the level of business activity.Total variable costs change when activity changes.Total fixed costs remain unchanged when activity changes.L O 312-6Cost Behavior PatternsL O 412-7Cost Behavior PatternsL O 5Great care must be taken with the use of fixed cost per unit data because any change in the volume of activity will change the per unit cost. As a general rule, do not unitize fixed expenses because they do not behave on a per unit basis! Sometimes fixed costs must be unitized, as in the development of a predetermined overhead application rate. It is also important to recognize that the relevant range is often quite wide, and significant increases in activity can be achieved without increasing fixed costs.12-8Relationship of Total Costto Volume of ActivityRelevantRangeActivityTotal CostEconomist’sCurvilinear Cost FunctionAccountant’s Straight-Line Approximation (constant unit variable cost)A straight line closely approximates a curvilinear variable cost line within the relevant range. L O 512-9Relationship of Total Costto Volume of ActivityTypical variable costs Raw materials Direct labor Factory utilities Sales commissions Shipping costsTypical fixed costs Real estate taxes Insurance Supervisory salaries Depreciation AdvertisingL O 512-10Estimating Cost Behavior PatternsThe high-low method isused to determine the fixedand variable componentsof a semivariable cost.L O 612-11The Contribution Margin FormatUsed primarily forexternal reporting.Used primarily bymanagement.Both formats report the same operating income!L O 712-12The Contribution MarginL O 8The contribution margin format derives its name from the difference between revenues and variable expenses.12-13Break-Even GraphL O 1112-14Operating LeverageWhen an entity’s revenues change because the volume of activity changes, variable expenses and contribution margin will change proportionately. But the presence of fixed expenses, which do not change as the volume of activity changes, means that operating income will change proportionately more than the change in revenues. This magnification of the effect on operating income resulting from a change in revenue is called “operating leverage.” The higher a firm’s contribution margin ratio, the greater its operating leverage.L O 1212-15End of Chapter 1212-16