Wk 4 DQ 1 - fixed and variable costs but result in a zero...

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What are the components of cost–volume–profit (CVP) analysis? How does a CVP income statement help management make decisions? What is break-even analysis and how does it work with cost–volume–profit analysis? As a manager, what decisions would you make to achieve a lower break-even point? How might you handle the break-even analysis for multiple product lines? The components of cost-volume-profit (CVP) are: -Selling price per unit - Variable cost per unit -Contribution margin per unit - Quantity of product sold (units of goods or services) - Total fixed costs Changes in profit can be examined using the cost-volume-profit analysis technique. Using these technique managers can see how profit changes in response to changes in sales volumes, prices, and costs. When the level of operating activity reaches a point at which the revenues cover all
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Unformatted text preview: fixed and variable costs but result in a zero profit is the breakeven point. Breakeven analysis is performed to find the level of activity that is required to reach the breakeven point. The breakeven point can be found using CVP analysis. The breakeven point can be calculated using either total revenues or number of units. From the analysis the manager can determine which volume needed, revenue required, increase or decrease costs, products to concentrate on and, how much to budget for costs. To achieve a breakeven point a manager might try to lower costs, increase prices, or ramp up production in order to increase output. The breakeven point for multiple products can be found by analyzing each product....
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