Marginal profitability analysis provides relevant decision information for setting prices, product design, and product profitability. Analysis of whether to open or close locations or divisions can also be done with marginal profitability analysis.
The course starts by defining marginal costs and marginal profits and then explains how to calculate marginal profitability. You will learn how to create cost-volume-profit (CVP) analyses and breakeven analysis. Marginal profitability is compared to traditional full absorption product costing or activity-based costing to identify the pros and cons of each method and when each is appropriate.
The course provides practical examples of making decisions with marginal profitability analysis. Examples include determining optimal production amounts and which products to promote. The final section explains how to calculate the change in profitability from a price increase and a price decrease. A worksheet template is provided for this analysis.
Course Publication Date:
May 30, 2020
This course is available with
NO ADDITIONAL FEE if you have an active
self study membership or
all access membership or can be purchased for
$10.00!
| Author: | Rob Stephens |
| Course No: | FIN-MARPROF-90020 |
| Recommended CPE: | 1.00 |
| Delivery Method: | QAS Self Study |
| Level of Knowledge: | Basic |
| Prerequisites: | None |
| Advanced Preparation: | None |
| Recommended Field of Study: | Finance
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Learning Objectives
- Explore the definitions of marginal costs and marginal profitability
- Discover how to use a cost-volume-profit analysis and breakeven analysis
- Identify the pros and cons of using marginal profitability analysis, activity-based costing, and traditional full absorption costing.
- Explore the following keys factors to profitability: cannibalization, excess capacity, and step-fixed costs
- Recognize the best uses for marginal profitability analysis