ADDIE Model for Instruction of Cost Accounting for 2nd year BSBA Financial Management

Lesson Title: COST - VOLUME - PROFIT ANALYSIS

I. ANALYSIS
Learning Competency
The learning competency for this course revolves around grasping the intricate concepts of Cost-
Volume-Profit (CVP) Analysis. Students will delve into understanding the relationship between
costs, volume of production or sales, and profits. Mastery of this competency enables students to
make informed decisions that drive profitability and sustainability within businesses.

Learners' Background
Targeted towards second-year financial management students at Naga College Foundation, this
course assumes a foundational understanding of basic accounting principles, financial
statements, and managerial accounting concepts. Students are expected to have familiarity with
terms such as revenue, cost, and profit, laying the groundwork for a deeper exploration of CVP
Analysis.

Learning Environment
The learning environment will be structured within a traditional classroom setting, supplemented
with technological aids such as multimedia presentations and online resources. Interactive
discussions, group activities, and practical exercises will foster engagement and facilitate deeper
understanding of the subject matter.

II. DESIGN
Learning Objectives
At the end of the 60-minute classroom instruction, with the use of learning modules, 85% of the
students are expected to:
• Know the meaning of break even point
• Determine the break even point in number of units and in total sales
• Determine the number of units to be sold to attain a targeted profit
• Prepare a profit volume graph
• Prepare a cost-volume-profit graph
• Know meaning and computation of contribution margin
• Explain the impact of risk, uncertainty, and changing variables on cost -volume - profit
analysis.

Procedures
The course will be structured around a combination of theoretical lectures, practical exercises,
and collaborative projects:
▪︎Theoretical Lectures: In-depth discussions led by experienced faculty members, covering
topics such as cost behavior patterns, contribution margin analysis, and break-even analysis.
▪︎Practical Exercises: Hands-on exercises and case studies designed to reinforce theoretical
concepts and develop analytical skills.
▪︎Collaborative Projects: Group projects that apply CVP analysis techniques to real-world
business situations, encouraging teamwork and critical thinking.

III. DEVELOPMENT
A.Vocabulary
• Cost-Volume-Profit (CVP) Analysis - A managerial accounting technique used to analyze the
relationship between costs, volume, and profits.
• Contribution Margin - The difference between sales revenue and variable costs, representing
the amount available to cover fixed costs and contribute to profit.
• Break-Even Point - The level of sales at which total revenue equals total costs, resulting in
neither profit nor loss.
• Sensitivity Analysis - An evaluation of how changes in key variables, such as sales volume or
selling price, impact profitability.

B. Materials needed for the lesson

Classroom with multimedia capabilities for interactive lectures and presentations.
• Whiteboard and markers for visual aids and problem-solving exercises.
• Handouts and worksheets containing practice problems and case studies.
• Access to online resources, including textbooks, articles, and videos, for further reading and
research.

C. Suggested Reading / External Links

• Textbook chapters on CVP Analysis and managerial accounting principles.
• Online articles or video tutorials explaining CVP concepts and applications in real-world
business scenarios.

IV. Implementation
A. Procedures of topics.
1. Lecture on CVP Analysis Fundamentals
- Define Cost-Volume-Profit (CVP) Analysis and its significance in managerial decision-
making.
- Explain the basic components of CVP Analysis: costs, volume of activity, and profit.
- Discuss the assumptions underlying CVP Analysis, such as constant selling price, fixed costs,
and linear cost behavior.
2. Cost Behavior Patterns
- Present different types of cost behavior patterns, including variable costs, fixed costs, and
mixed costs.
- Explain how each type of cost behaves in relation to changes in volume or activity levels.
- Provide examples and illustrations to clarify the concepts and help students identify cost
behavior patterns in real-world scenarios.

3. Contribution Margin Analysis

- Define contribution margin and explain its significance in assessing profitability.
- Demonstrate how to calculate contribution margin per unit and contribution margin ratio.
 - Illustrate how contribution margin can be used to analyze the profitability of individual
products or services and make pricing decisions.

4. Break-Even Analysis
- Introduce the concept of the break-even point and its importance in decision-making.
- Explain how to calculate the break-even point in units and sales dollars using the contribution
margin approach and the equation method.
- Discuss the implications of the break-even point for pricing strategies, cost control, and profit
planning.

5. Profit Planning and Decision Making

- Discuss how CVP Analysis can be used for profit planning and decision-making.
- Explore scenarios where CVP Analysis is applied to evaluate the impact of changes in sales
volume, selling price, or cost structure on profitability.
- Provide examples of how businesses can use CVP Analysis to set sales targets, determine
product mix, and allocate resources effectively.

6. Sensitivity Analysis
- Introduce sensitivity analysis as a tool for assessing the impact of uncertainty on business
decisions.
- Explain how sensitivity analysis is used to evaluate the sensitivity of key variables, such as
sales volume or cost, on profitability.
- Demonstrate how to perform sensitivity analysis using "what-if" scenarios and sensitivity
charts.

B. Discussion Questions
• How can businesses use CVP analysis to inform pricing decisions and maximize profitability?
• What are the limitations of CVP analysis, and how can businesses overcome them in practice?
• Explore the relationship between CVP analysis and pricing strategies. How can businesses use
CVP insights to set optimal pricing levels and maximize profitability?
• Discuss the relevance of CVP analysis in service-oriented industries, where costs may be less
tangible than in manufacturing settings. How can service-based businesses adapt CVP analysis to
suit their needs?
• Explore the concept of margin of safety in CVP analysis. How can businesses use the margin of
safety to assess their risk exposure and make informed decisions about capacity utilization and
expansion?
• Reflect on real-world examples of companies that have successfully applied CVP analysis to
achieve strategic objectives. What lessons can be learned from these case studies, and how can
businesses emulate their success?

V. Evaluation
A. Formative Assessment
• In-class quizzes and discussions to assess understanding of CVP analysis concepts and
principles.
• Group presentations on applying CVP analysis techniques to case studies or real-world
scenarios.

B. Summative Assessment
Written exam evaluating students' comprehension of CVP analysis principles, including
calculation of contribution margin, break-even point, and sensitivity analysis.

C. Assignment
Analyze a business case study using CVP analysis techniques and present findings in a written
report, including recommendations for strategic decision-making.

Prepared by:
MALESIA N. ALMOJUELA BSA 3A
MYLENE JOY C. BERIN BSA 3A
JAKE LAURENCE N. MAGAS BSA 3A