Chapter 6
Cost-Volume-Profit
Relationships
McGraw-Hill /Irwin © The McGraw-Hill Companies, Inc., 2007
,Basics of Cost-Volume-Profit Analysis
Contribution Margin (CM) is the amount
remaining from sales revenue after variable
expenses have been deducted.
6-2
,Basics of Cost-Volume-Profit Analysis
CM is used first to cover fixed
expenses. Any remaining CM
contributes to net operating income.
6-3
, Learning Objective
LO1
To explain how changes in
activity affect contribution
margin and net operating
income.
6-4
Cost-Volume-Profit
Relationships
McGraw-Hill /Irwin © The McGraw-Hill Companies, Inc., 2007
,Basics of Cost-Volume-Profit Analysis
Contribution Margin (CM) is the amount
remaining from sales revenue after variable
expenses have been deducted.
6-2
,Basics of Cost-Volume-Profit Analysis
CM is used first to cover fixed
expenses. Any remaining CM
contributes to net operating income.
6-3
, Learning Objective
LO1
To explain how changes in
activity affect contribution
margin and net operating
income.
6-4
