Explain single product cost-volume-profit (CVP) and break-even
analysis. Provide a hypothetical example of CVP and breakeven
analysis. Provide in-text citations and explain your example in
detail.
Cost volume profit (CVP) :_
Cost volume profit shows the relation between sales volume, price and costs, these three factors affects the profit of company. Such CVP analysis used in decision making for the company. Profit volume(PV) ratio is one of the ratio from CVP analysis. PV ratio is the ratio between Contribution and sales of the company.
For example:- Let's say Sales of the company is $10,000,000 and variable cost = $3,585,000
Contribution will be Sales-variable cost = $10,000,000 - $3,585,000 = $6,415,000
PV ratio = Contribution/sales *100 = $6,415,000 / $10,000,000 * 100 = 64.15%
Here in this example, PV ratio of 64.15% is the contribution before fixed cost that a company has earned from its sales.
Break Even Analysis:-
Break even analysis show the situation where the company is at zero profit situation, means no profit no loss situation. Break even analysis or the break even point is the point that given the level at which company earns no profit or incurred no loss. Break even point is one of the analysis that comes under Break even analysis. Break even analysis is the ratio between fixed cost and PV ratio (%) of the company.
For example;- Let's say in the above example Fixed cost of the company is $1,300,000 and PV as calculated in the above example is 64.15% , Break even point will be Fixed cost / PV ratio = $1,300,000 / 64.15% = $2,026.500. This is the point where company is at zero profit/loss situation means company incurred no loss and earned zero profit.
Explain single product cost-volume-profit (CVP) and break-even analysis. Provide a hypothetical example of CVP and brea...
Cost-volume-profit (CVP) analysis is a powerful tool for planning and decision making. Thus, CVP analysis emphasized the interrelationships of costs, quantity sold, and price. This analysis is defined as assessment of total revenues, total costs and operating income in response to changes in the volume of sales, the selling price, variable cost or fixed costs of production. The CVP analysis can be a valuable tool in identifying the extent and magnitude of the economic trouble a company is facing and...
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Explain multiproduct breakeven analysis. What is the assumption on proportions among the quantities in multiproduct breakeven analysis? Provide a hypothetical example of multiproduct breakeven analysis. Provide in-text citations and explain your example in detail.
Explain the basic components of cost-volume-profit (CVP) analysis. Why is it important to determine a company's break-even point?
Explain the basic components of cost-volume-profit (CVP) analysis. Why is it important to determine a company's break-even point?
Chapter 3 - Journal Cost-Volume-Profit Analysis Break Even Analysis Break Even is the level of operations where Profit equals zero. EXERCISE 1: Abner Corporation makes a product that sells for $200 per unit. The Variable Costs per unit are $120. Fixed Costs total $500,000 each year. Abner currently sells 7,500 units per year. Calculate the number of units that Abner must sell to break even. Use the equation method to solve for the number of units Abner needs to sell...
Cost Accounting = Find a numerical example of cost-volume-profit (CVP) analysis, and analyze how CVP analysis is used for decision making?
The cost volume profit analysis, commonly referred to as CVP, is a planning process that management uses to predict the future volume of activity, costs incurred, sales made, and profits received. In other words, it’s a mathematical equation that computes how changes in costs and sales will affect income in future periods (Peavler, 2019). CVP analysis provides managers with the advantage of being able to answer specific questions needed in business analysis. Such as, what is the company's breakeven point?...
Find a numerical example of cost-volume-profit (CVP) analysis, and analyze how CVP analysis is used for decision making?
Find a numerical example of cost-volume-profit (CVP) analysis, and analyze how CVP analysis is used for decision making?