Objectives: Chapter Eighteen

The following learning objectives for this chapter map to the curriculum design for our online university-level courses. These courses are offered through Utah State University, and result in the awarding of up to 6 hours of highly transferrable college credit. To learn more, check out the classroom link.

Cost behavior patterns and implications for managing a business.

Differentiate between a variable cost, fixed cost, and mixed cost.

Describe the nature of variable costs, in the aggregate and per unit.

Describe the nature of fixed costs, in the aggregate and per unit.

Describe the concept of economies of scale.

What is meant by the term "relevant range?"

Discuss the nature of specific types of fixed costs:  committed fixed costs and discretionary fixed costs.

Identify the nature of a step cost, and cite the appropriate business strategy for dealing with step costs.

Methods of cost behavior analysis.

Carefully describe the nature of a mixed (semivariable cost).

Use a scattergraph, method of least squares, and the high-low method to sort the fixed/variable components of a mixed cost.

Be able to apply the mechanics of the high-low method.

Break-even and target income analysis.

Define cost-volume-profit analysis.

Be able to prepare a "break-even graph."

Define the contribution margin; distinguishing between aggregate, per unit, and ratio amounts.

Understand the break-even point and target income.

Be able to perform break-even and target income computations.

What are some of the applications for CVP analysis?

Cost and profit sensitivity analysis.

Understand the impact of operating changes on break-even and other CVP computations.

Be able to adjust CVP calculations for changes in fixed and variable costs.

Understand the income impacts of per unit revenue shifts.

Cost-volume-profit analysis for multiple products.

Be able to apply CVP analysis to firms with multiple products.

Critical assumptions of cost-volume-profit modeling.

Cite the assumptions of CVP modeling.