Question 2 Cost Volume Profit Analysis 1.0 Introduction According to Jon Scheumann “a successful organizations need a culture that is attuned to cost management and pay attention to cost structure” From that statement manager must pay attention and carefully thinking when do decision making to the cost. For example when manager want to target the profit. They must take every cost that related in production such as variable cost and fix costs. Cost Volume profit analysis is used in decisions
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COST-VOLUME-PROFIT ANALYSIS(CVP) Definition of Cost Accounting A type of accounting process that aims to capture a company’s costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Definition of Cost-Volume Profit Analysis A method of cost accounting used in managerial economics. Cost-volume profit analysis is based upon determining the breakeven point of cost and volume of goods. It can be useful for
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BEHAVIOR OF COSTS Changes from the Twelfth Edition All changes to Chapter 16 were minor. Approach We have retained our approach of putting all C-V-P topics in a single chapter because many schools’ marketing and management accounting core courses start simultaneously‚ and marketing likes to have break-even analysis covered early in the management accounting course. Also‚ if there are students in the course with work experience or‚ in the case of MBA courses‚ with some undergraduate
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Cost‚ Volume‚ and Profit Cost-Volume-Profit (CVP) analysis is a managerial accounting tool that expresses the simplified relationship between cost‚ volume‚ and profit (or loss). CVP analysis is based on several factors and assumptions and uses a formula to express the relationship by equation or graphically and can be used with great effect by managers who understand the limitations of the analysis. Cost-Volume-Profit (CVP) analysis is a managerial accounting tool that expresses the simplified
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COST-VOLUME PROFIT (CVP) ANALYSIS This is a technique used for planning short-term run profits by finding the relationship between profits and factors that influence profits. The following factors are taken to be influencing profits:- • Selling price • Variable cost of production • Fixed costs • Activity level (production and sales units) Profit planning is based on break-even analysis and can be worked out using either; a) Algebraic method b) Contribution method c) Break-even
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COST – volume –profit analysis LEARNING OBJECTIVES Students should be able to: 1. Explain the nature of CVP Analysis and name and illustrate planning and Decision-making situations in which it may be used‚ 2. Separate semi-variable (mixed) costs into their fixed and variable components. 3. Construct profit/volume charts given selling price‚ costs and volume data. 4. Construct a cost/volume/profit (CVP) model representing the data in a marginal
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fixed costs‚ variable costs and other ancillary information. It was also brought to our attention that presently the Company is catering the demand of its product W within a local community. However the Company wishes to analyse the implications if a decision is made in respect of launching product W at the state level. As a consulting firm‚ we will perform a cost-volume-profit [CVP] analysis whereby we will examine where the Company stands now and where the Company intends to be. CVP analysis is extension
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COST-VOLUMEPROFIT ANALYSIS Julie E. Colandog A systematic examination of the relationship among cost‚ cost driver or level of activity (volume)‚ and Sales Less: Variable Costs Contribution Margin Less: Fixed Costs Net Profit xxxx xxxx xxxx xxxx xxxx CONTRIBUTION MARGIN INCOME STATEMENT e s Sa l Total Cost Break-even point Fixed Cost Break-even point is a condition where total revenue equals total cost and profit is equal to zero BREAK-EVEN POINT Break-even point (pesos) = Total Fixed
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THE USE OF COST-VOLUME-PROFIT ANALYSIS AS A MANAGEMENT TOOL FOR DECISION MAKING CASE STUDY OF NIGERIAN BREWERIES PLC TABLE OF CONTENTS Title page Dedication Acknowledgement Abstract Table of contents CHAPTER ONE 1. INTRODUCTION OF “COST VOLUME PROFIT ANALYSIS AS A MANAGEMENT TOOL FOR DECISION MAKING” 1.1 Background of study 2. Statement of the problem 3. Objectives of the study 4. Significance of the study 5. Research Questions 6. Research
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a business alternative to Digital Ltd‚ based on a CVP analysis of the three business plans the company has provided. Before going to more detail of the recommended option‚ I would like to emphasis on the importance of CVP analysis. As CVP is a ‘systematic method of examining the relationship between changes in activity and changes in total revenue‚ expenses and net profit’ (Drury‚ 2000)‚ it is a very useful tool for managers to consider cost structure and price setting. When used in computer applications
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