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cost volume and profit - 1 Assignment Cost Volume and...

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Assignment: Cost, Volume, and Profit Formulas Cost, Volume, and Profit Formulas Nikki Vergets Acc/220 12/18/10 Eric Weitner 1
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1. Explain the components of Cost, Volume, and Profit analysis. Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there are several assumptions made, including: - Sales price per unit is constant. - Variable costs per unit are constant. - Total fixed costs are constant. - Everything produced is sold. - Costs are only affected because activity changes. - If a company sells more than one product, they are sold in the same mix. 2. What does each of the components mean? The volume or level of activity is basically how many units are produced or sold. The unit selling prices are the cost that each unit produced is sold or expected to be sold for. The variable cost per unit basically means that the cost of each unit produced or sold may change, depending on the activity level. Differing from variable costs, fixed costs
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