Reflexion
Week Four Learning Team E Reflection: Cost Volume Profit
Tiffany Ferguson, Carmen Ortiz
ACC/561
9/22/2014
Ms. Karen Boulay
Cost Volume Profit
This week the team was ask to review the material on cost volume profits and discuss the activities and its importance to managers for number crunching and for entrepreneurs starting a new business. Below are a few opinions from the team on their interpretation of the material.
Carmen’s Reflexion
Cost Volume Profit (CVP) is 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 managers making short-term economic decisions, and also for general educational purposes. CVP analysis provides managers with several advantages that help them in the decision-making process. (Kimmel, 2011) Some of these advantages are the following:
Provide information such as what the company 's breakeven point. This help manager’s project how future spending and production will contribute to the success or failure of the company. For instance, when a manager knows the breakeven point, he can tweak spending and increase production efforts to increase profitability.
Provides a detailed snapshot of company activity. This includes everything from the costs needed to produce a product to the amount of the product produced. This helps managers determine, very specifically, what the future will hold if variables are altered. For instance, transportation expenses and costs for materials can change. These variable costs can affect the bottom line. CVP analysis allows the manager to plug in variable costs to establish an idea of future performance, within a range of possibilities. Is is important that the manager be detailed on the data they record. If not it can be a disadvantage.
Projections based on cost estimates, rather than precise numbers, can result in inaccurate projections. The CVP approach to
Tiffany Ferguson, Carmen Ortiz
ACC/561
9/22/2014
Ms. Karen Boulay
Cost Volume Profit
This week the team was ask to review the material on cost volume profits and discuss the activities and its importance to managers for number crunching and for entrepreneurs starting a new business. Below are a few opinions from the team on their interpretation of the material.
Carmen’s Reflexion
Cost Volume Profit (CVP) is 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 managers making short-term economic decisions, and also for general educational purposes. CVP analysis provides managers with several advantages that help them in the decision-making process. (Kimmel, 2011) Some of these advantages are the following:
Provide information such as what the company 's breakeven point. This help manager’s project how future spending and production will contribute to the success or failure of the company. For instance, when a manager knows the breakeven point, he can tweak spending and increase production efforts to increase profitability.
Provides a detailed snapshot of company activity. This includes everything from the costs needed to produce a product to the amount of the product produced. This helps managers determine, very specifically, what the future will hold if variables are altered. For instance, transportation expenses and costs for materials can change. These variable costs can affect the bottom line. CVP analysis allows the manager to plug in variable costs to establish an idea of future performance, within a range of possibilities. Is is important that the manager be detailed on the data they record. If not it can be a disadvantage.
Projections based on cost estimates, rather than precise numbers, can result in inaccurate projections. The CVP approach to
References: Kimmel, P. (2011). Accounting. 4ed.Wyley Customs Solutions. Peavler, Rosemary. (2014). Fixed and Variable Cost. http://bizfinance.about.com/od/pricingyourproduct/qt/Fixed_Variable_Costs.htm