Week 4 Discussion Questions

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Week 4 Discussions

Week 4 Discussion Question 1

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?

The CVP analysis is the level of activity at which total revenues equal total costs (both fixed and variable). A break-even analysis is the process of finding the break-even point. The cost-value-profit is the study of how specific costs respond to changes in the level of business activity.

As a manager, I would want to try to make the highest quality of merchandise utilizing the materials at a much lower cost. As a manager it is important to understand how to achieve the break-even point in relation to the company’s cost (bills). At the end of the day, the bottom line is all of the bills have to get paid and the company can walk away with a little in the bank as well.

Reference:
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting: Tools for business decision making (3rd ed.). Hoboken, NJ: John Wiley & Sons

Week 4 Discussion Question 1

Imagine Widgets Airlines, Inc. operates 18-seat commercial flights between New York City and Washington, DC. After 10 seats have been sold on each aircraft, the company has reached the break-even point. Should Widgets consider offering a discounted fare for seats 11 through 18? What are the advantages and disadvantages of not offering a discount on seats 11 through 18? What are the advantages and disadvantages of offering a discount on seats 11 through 18? How would you decide how much of a discount, if any, could be offered? What effect would the discount have on the financial statements of Widgets Airlines, Inc.?

I believe that it can be both beneficial as well as detrimental offering discounted tickets to seats 11 through 18. While it can be beneficial and assist in the selling of tickets, it may not be so good because people may wait to the last minute to purchase the tickets,...
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