How to Read and Interpret Financial Statements

9

Analysis of Operational Results

Learning Objectives By the end of this chapter, you should be able to: • List the three kinds of costs. • Explain the term break-even point. • List three uses of break-even analysis. • Define the term contribution margin. • Identify the five factors that influence cost-volume-profit analysis.

INTRODUCTION

One’s objective in managing a business is described simply in this way: to assure that the benefits achieved exceed the sacrifices made. Managers are constantly faced with decisions about selling prices, variable and fixed costs, choice of product lines, market strategy, utilization of production facilities, ...