Marginal Profitability Analysis
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 information
Course No. S001
Format: Online video with final exam
Instructional Delivery Method: QAS Self-Study
Prerequisites: None
Advance Preparation:None
Level: Overview
CPE Credit: 1.5 Hrs.
Field of Study: Finance: Technical
Course expiration: You have one year from date of purchase to complete the course.
Course Revision Date: September 2023
Objectives
Marginal Profitability Analysis Course Objectives
After completing this course, participants should be able to:
- Recognize the definitions of marginal costs and marginal profitability
- Identify 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.
- Identify the following key factors to profitability: cannibalization, excess capacity, and step-fixed costs
- Recognize the best uses for marginal profitability analysis
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