LO1

Explain how changes in activity affect contribution margin and net operating income.

LO2

Prepare and interpret a cost-volume-profit (CVP) graph and a profit graph.

LO3

Use the contribution margin ratio (CM ratio) to compute changes in contribution margin and net operating income resulting from changes in sales volume.

LO4

Show the effects on contribution margin of changes in variable costs, fixed costs, selling price, and volume.

LO5

Determine the level of sales needed to achieve a desired target profit.

LO6

Determine the break-even point.

LO7

Compute the margin of safety and explain its significance.

LO8

Compute the degree of operating leverage at a particular level of sales and explain how it can be used to predict changes in net operating income.

LO9

Compute the break-even point for a multiproduct company and explain the effects of shifts in the sales mix on contribution margin and the break-even point.