CheckPoint Cost, Volume, and Profit Questions

CheckPoint Cost, Volume, and Profit Questions - analysis...

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Mixed cost should be classified in to their own fixed and variable elements. There are many different ways to be able to properly classify the mixed cost; the most popular one is the high low method. The high low method uses cost between the highest and the lowest points in the company then averages the two costs out. Being able to average out the highest and lowest points you are able to keep it within reason to estimate the variable cost for the company at any given time. I do believe that the CVP analysis is based on the unit cost for any company that is selling a product. A company has to know where the line is to break even or when they make their money. The unit cost that the CVP is available to show them is kind of giving the owners or managers a preset goal to what they need to hit to be able to keep their jobs. Granted that the
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Unformatted text preview: analysis does show you the total amount, but it is nice to see how what you have to be able to do to achieve to get that bottom line that you are going for. To be able to properly plot out a breakeven point on a graph first place your total projected sales on the horizontal axis and then on the vertical axis would be your total revenue and total cost. You then continue to plot out your cost and total revenue expected and however many units sold, and to determine the breakeven point would be your intersection between total cost line and total revenue. After you find the intersection you then can drawing a vertical line to the horizontal axis which is your projected sales and that gives you your breakeven point and how it is determined....
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