Understanding CVP Relationships
Suppose your sister works for a small real estate office as a receptionist. Her employer is possibly going to be forced to lay off several employees and explained that the company was not “breaking even” and that layoffs would start next month unless things change. The boss has also asked all employees to think of ways that the company could hit that magical break-even point and, ultimately, earn a profit. Your sister has come to you for help in understanding the boss’s comments and wants suggestions to pass along.
Required:
1.Explain the following concepts and their relationships to your sister: break even, variable cost, fixed cost, contribution margin, and profit.
2.Help your sister identify five suggestions to offer the boss that would improve the company’s performance.
3.Explain why just breaking even will not ensure that your sister keeps her job over the long term.
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