cost_profit_and_varible_costing.docx - Profit cost volume...

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Profit cost volume relationship Cost volume profit relationship is the analysis and it studies the relationships between the factors and its impact on the profits such as selling price per unit and total sales amount. The fixed cost and the variable cost are the total cost. Cost-volume-profit (CVP) evaluation is a technique of fee accounting that appears at the effect that various degrees of prices and extent have on running profit. The cost-volume-profit evaluation makes numerous assumptions, together with that the income price, constant costs, and variable value per unit are constant. The cost-volume-profit analysis, additionally typically regarded as a break-even analysis, appears to decide the break- even factor for distinctive income volumes and price structures, which can be beneficial for managers making non-permanent monetary decisions. CVP evaluation is most frequently used to decide a company's break-even point. This is the stage of income the place the agency will no longer incur a loss, but now not make a profit. To calculate the break-even point, you need to first calculate the contribution margin. The contribution margin is a company's income much less its variable expenses. Then, divide the company's constant expenses via the contribution margin. This will supply you the company's break-even factor in whole bucks of income. Like the break-even point, the margin of safety can be expressed either in units or sales dollars. However, the margin of safety is most often expressed as a percentage of sales. The first step in calculating the margin of safety is to calculate the break-even point in sales dollars.

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