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Make more profit and avoid costly mistakes with marginal profitability analysis

Marginal profitability analysis gives you decision information for setting prices, product design, and product profitability. It can also help you decide whether to open or close locations.

This course is a bit more technical than the other courses I have. I built this for CPAs but I added it to my site for those of you interested in seeing how marginal profitability can help you make better decisions. 

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 analyses. 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 curriculum

  • 1

    Introduction

    • Introduction

  • 2

    What are Marginal Costs?

    • Marginal Costs Part I

    • Marginal Costs Part II

  • 3

    How to Calculate Marginal Profitability

    • Marginal Profitability Calculation

    • Data Table

    • Marginal Profitability and Activity Based Costing

    • Cost Volume Profit (CVP) Analysis

  • 4

    Practical Uses of Marginal Profitability Analysis

    • Uses: How Much to Produce, Major Investments

    • Price Change Analysis Template

    • Uses: Setting Pricing

    • Uses: Using Goal Seek for Breakeven Analysis

    • Example: Pricing Increase Analysis