ACC220_WK6_Cost_Vol_Prof - Cost, Volume, Profit Student...

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Cost, Volume, Profit Student Name Axia College – University of Phoenix
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The five components of a cost volume profit (CVP) analysis are volume or level of activity, unit selling prices, variable cost per unit, total fixed costs, and sales mix. (2008) The volume or level of activity can be measured by sales units or sales dollars of a business, and is measured in a cost behavior analysis. This analysis studies of how specific costs respond to changes in the level of business activity. (2008) Variable costs are costs that vary in total directly and proportionately with changes in the activity level. If the level increases 10 percent, total variable costs will increase 10 percent. If the level of activity decreases by 25 percent, variable costs will decrease 25 percent. Examples of variable costs include direct materials and direct labor for a manufacturer; cost of goods sold, sales commissions, and freight-out for a merchandiser; and gasoline in airline and trucking companies. A variable cost may also
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ACC220_WK6_Cost_Vol_Prof - Cost, Volume, Profit Student...

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