MANACC
Slide 2
After the Strategic Planning, in order for the Marketing Department to be competitive in the market, they requested for an increase in marketing budget (fixed cost / selling cost).
Now, the questions are:
1. How much sales would have to increase to justify the big marketing campaign the sales and marketing department is pushing?
2. Shall we lower prices? But will the increased volume offset the loss in revenue from the lower price?
Since WatchOut is concerned about the relationships among selling prices, costs, and volume, we are going to use the cost-volume analysis.
Slide 3
Question would be: what is CVP Analysis? And why are we using it?
Cost-Volume-Analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit.
CVP Analysis Focuses on how profits are affected by the following factors:
Because CVP analysis will help us understand how profits are affected by these key factors, it is a vital tool in many business decisions.
These decisions include what products and services to offer, what prices to charge, what marketing strategy to use, and what cost structure to implement.
Slide 4
Now, in order for us to judge the impact in profits of changes in selling prices, cost, or volume, we will be going to use a contribution income statement to emphasize the behavior of costs.
We will then base our analysis on the contribution income statement for the past 3 years.
Sales, variable expenses and contribution margin are expressed on a per unit basis as well as the contribution income statement.
This income statement has been prepared for management’s use inside the company and would not ordinarily be made available to those outside the company.
Slide 5
Contribution margin is the marginal profit per unit sale or also gross profit.
Given the contribution margin, a manager can easily compute breakeven and target income sales, and make better decisions about whether to
After the Strategic Planning, in order for the Marketing Department to be competitive in the market, they requested for an increase in marketing budget (fixed cost / selling cost).
Now, the questions are:
1. How much sales would have to increase to justify the big marketing campaign the sales and marketing department is pushing?
2. Shall we lower prices? But will the increased volume offset the loss in revenue from the lower price?
Since WatchOut is concerned about the relationships among selling prices, costs, and volume, we are going to use the cost-volume analysis.
Slide 3
Question would be: what is CVP Analysis? And why are we using it?
Cost-Volume-Analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit.
CVP Analysis Focuses on how profits are affected by the following factors:
Because CVP analysis will help us understand how profits are affected by these key factors, it is a vital tool in many business decisions.
These decisions include what products and services to offer, what prices to charge, what marketing strategy to use, and what cost structure to implement.
Slide 4
Now, in order for us to judge the impact in profits of changes in selling prices, cost, or volume, we will be going to use a contribution income statement to emphasize the behavior of costs.
We will then base our analysis on the contribution income statement for the past 3 years.
Sales, variable expenses and contribution margin are expressed on a per unit basis as well as the contribution income statement.
This income statement has been prepared for management’s use inside the company and would not ordinarily be made available to those outside the company.
Slide 5
Contribution margin is the marginal profit per unit sale or also gross profit.
Given the contribution margin, a manager can easily compute breakeven and target income sales, and make better decisions about whether to