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Financial and Managerial Accounting by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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Chapter 19 Cost-Volume-Profit

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Learning Objectives

After studying this chapter, you should be able to:

  1. Distinguish between variable and fixed costs.
  2. Explain the significance of the relevant range.
  3. Explain the concept of mixed costs.
  4. List the five components of cost-volume-profit analysis.
  5. Indicate what contribution margin is and how it can be expressed.
  6. Identify the three ways to determine the break-even point.
  7. Give the formulas for determining sales required to earn target net income.
  8. Define margin of safety, and give the formulas for computing it.

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Feature Story

Don't Worry—Just Get Big

It wasn't that Jeff Bezos didn't have a good job. He was a vice president at a Wall Street firm. But, he quit his job, moved to Seattle, and started an online retailer, which he named Amazon.com. Like any good entrepreneur, Jeff strove to keep his initial investment small. Operations were run out of his garage. And, to avoid the need for a warehouse, he took orders for books and had them shipped from other distributors’ warehouses. One board member recalls how excited the board was whenever an order came in from a customer in a state that Amazon had never serviced before. By its fourth month, Amazon ...

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