Cost Volume Profit Analysis
Cost Volume Profit Analysis
Module 1 Submission attached.
COST–VOLUME–PROFIT ANALYSIS
Second part of the presentation. See background information for the Module 1 SLP.
Required:
Include the following items in your presentation:
- What about special pricing for some markets or customers?
- Determination of customer profitability.
- Show effect on revenues and profitability based on stated assumptions.
- Potential advantages and disadvantages, both financial and non-financial.
SLP Assignment Expectations
Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.
COST-VOLUME-PROFIT ANALYSIS
Modular Learning Objectives
Keep the following objectives in mind as you work through the material in this module:
- Define of cost-volume-profit.
- Understand the relationship between variable costing and cost-volume-profit analysis.
- Apply and analyze break-even.
- Compute break-even in units.
- Compute break-even in sales.
- Analyze target profit.
Required Reading
Variable and fixed costs were introduced in the prior module. Now it is time to examine cost behavior in more detail by familiarizing yourself with the following while keeping the above six objectives in mind. Click on the three arrows to explore each topic in more detail.
Check Your Understanding
Check your understanding to make sure that you have a good grasp of the background material. If you are not comfortable with the concepts, review some of the material again or go to the optional resource for more examples.
 | Click on the quiz icon for an ungraded, 20-question true-or-false self-study quiz to check your progress. If you are not satisfied with the score, review some of the material again. For more in-depth information, review materials listed under optional reading at the bottom of this page. |
Final Thoughts
Cost-Volume-Profit (CVP) analysis is a computational method that analyzes the effect of sales and product costs on the operating income of a business. Specifically, it assesses the effect of changes in variable costs, fixed costs and selling price on operating income. Break-even analysis (with or without a target profit) is a common CVP approach. Another definition of break-even is where the total contribution margin equals total costs. A contribution margin income statement shows zero income at break-even.
Several assumptions underlie CVP analysis:
- All cost can be categorized as variable or fixed.
- Sales price per unit, variable cost per unit, and total fixed cost are constant.
- Mixed costs must be split into their fixed and variable component by an estimation process.
- Understanding the behavior of costs makes cost-volume-profit analysis possible.
Optional Reading
For further detail refer to Dr. Walther’s accounting text and videos.
 | Walther, L. (2017). Chapter 18: Cost-Volume-Profit and Business Scalability.
|
Answer previewCost Volume Profit Analysis
The profit of a given product depends on the volume of sales and the total costs incurred. A cost volume profit (CVP) analysis builds the relationship between the products costs, sales volume, and profitability (Walther, 2017). At the point of break even in CVP analysis, the contribution margin is equivalent to the fixed costs. The implications of the breakeven situation are that various efforts need to be implemented in order to achieve a profit or otherwise a loss. If the sale of the specialty coffee would result to profit the contribution margin need to be greater than the total fixed costs. A higher contribution margin is reflected by high sales volume or price per product. Cost Volume analysis can, therefore, help in the determination…
(700 words)