We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

C-V-P equation.Contribution margin - Essay Example

Comments (0) Cite this document
Summary
The C-V-P equation or the Cost Volume Profit Analysis is a major step in major decisions. It is the model which defines a relationship between the sales price, cost or production, sales volume and other costs of any product. …
Download paper
GRAB THE BEST PAPER
C-V-P equation.Contribution margin
Read TextPreview

Extract of sample
C-V-P equation.Contribution margin

The C-V-P equation or the Cost Volume Profit Analysis is a major step in major decisions. It is the model which defines a relationship between the sales price, cost or production, sales volume and other costs of any product. The major purpose of this model and its application is the predictability of future profits and its change based on changes in either volume or any of the components of costs that it takes into account.It is important for managers to decide if their materials costs and other direct variable costs are too high given the revenue from the product. Keeping aside the fixed costs which have to be borne irrespective of the sales revenue, the remaining costs which are directly proportional to units sold can be minimized to manage cash flows in a better way. They can cut on their variable costs by having a look at the contribution margins of their company and their products.The contribution of sales to before tax profits, or gross profits, over and above the break even is exactly the contribution margin as there are no fixed costs any more. The amount after the deduction of variable costs from the revenues will be added to the profits.CVP graphs help the manager and the reader to have a better figure of the relationship between the profits, sales and volume of sales. CVP graphs also helps in viewing the breakeven points on the graph and provides a better insight into the profit-impact of increased sales or costs.When we have a increase in the fixed costs, the breakeven point changes. ...
13. When other factors are constant, what is the effect on profits of an increase in fixed costs Of a decrease in variable costs
When we have a increase in the fixed costs, the breakeven point changes. The breakeven point is the point where the profits are zero or the total contribution margin is equal to the fixed costs. It's a no-profit and no-loss position.
When the fixed costs increase in the [(Fixed costs) / (contribution margin)] calculation of break-even point, the number of units to break even increases. If there is a decrease in variable costs, the contribution margin increases, given the same price. Due to this, the break even units decrease as the denominator is increasing.
14. What are the limiting assumptions of C-V-P analysis
The CVP model assumes that the prices of the units will remain constant and do not change in the entire process. Variable and fixed components can be easily and accurately calculated for units. The determination of fixed and variable costs, in actual conditions, is very difficult. Inventories are available at all times to make sales and that there is no shortage of supply of products to sell. The sales mix remains constant for multi product companies too.
Practice 16-3 Linearity of Variable Costs within the Relevant Range
The company has assembled the following data about its variable costs:
Level of Activity
Total Variable Cost
1,000 units
$ 25,000
2,000 units
46,000
3,000 units
69,000
4,000 units
92,000
5,000 units
100,000
The company is currently producing 3,300 units. According to these data, what is the relevant range over which the company can assume that the variable cost per unit is constant
In this case, the ... Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“C-V-P equation.Contribution margin Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/297120-c-v-p-equationcontribution-margin
(C-V-P Equation.Contribution Margin Essay Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.net/finance-accounting/297120-c-v-p-equationcontribution-margin.
“C-V-P Equation.Contribution Margin Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.net/finance-accounting/297120-c-v-p-equationcontribution-margin.
  • Cited: 0 times
Comments (0)
Click to create a comment
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
C. P. Ellis: A Man Lost in the Realm of Misconception and Mismatch
The extreme negativism toward people of different identity just because the things go constantly wrong is madness which comes to being quite natural for those who let such feelings fulfill them. The theoretical approach by Parillo is taken to find out and analyze the exact points of juxtaposition in the Ellis’s story.
3 Pages(750 words)Essay
Court of Justice Judgment in Case C-356/05 Elaine Farrell v Alan Whitty and Byrne v Motor Insurance
The Court of Justice judgment in case C-356/05 Elaine Farrell v Alan Whitty, Minister for the Environment, Ireland, Attorney General and Motor Insurers Bureau of Ireland (MIBI), judgment of 19 April, 2007 is a case concerning obligatory insurance for civil liability in respect to motor vehicles.
7 Pages(1750 words)Essay
Pregnancy Discrimination in The Workplace - Case Study: Michele C Krause V UPS Supply chain Solutions
According to the fact sheets of maternity associated with redundancy in 2009, it was ascertained that majority of the women who returned after their maternity leave along with a considerable fraction of pregnant working women, were selected for redundancy without any prior information or firm reasons (Maternity action, 2009).
4 Pages(1000 words)Essay
Reaction paper on Romantic love conceptualized as an attachment process by Hazan, C., & Shaver, P. (1987)
These styles were then related to adult romantic love. The article aims to develop further the theories of Bowlby and Ainsworth that
2 Pages(500 words)Essay
Fare .v. Michael. C
d with the responsibility of safeguarding juvenile’s interests, he does not have any obligation of substituting the attorney or lawyer in legal matters (Blackmun, 1979). Hence, the attorney or lawyer ought to be there during the interrogation and not the probation officer as
2 Pages(500 words)Case Study
Margin Call
The CEO of the company, John, also backs this plan because it offers a quick way out for a company that is facing financial ruin. However, the investment floor head, Sam, argues that doing this will destroy any credibility that
2 Pages(500 words)Essay
The Margin Call Movie
Even though at the beginning of the meeting some of the senior executives (Rogers, Robertson, Tuld and Cohen) make the rest believe that the issue is new, it eventually comes to be known as the movie proceeds that they knew of the crisis beforehand but did nothing to avert it.
2 Pages(500 words)Essay
ETHICS/ P/C FORMAT
Therefore, if the intention of grading system is to help the teacher posses a regular way to transmit to students and to any other concerned party with the intellectual development of the student by way of the value judgment made by the teacher (CH 12, 368). Then I
1 Pages(250 words)Essay
(((p)))
rs with the tools to motivate them to have options relating to providing education on the basis of a sound knowledge of children’s learning processes and development. In my view, DAP also makes teachers appreciate the individual differences in children in the learning process
3 Pages(750 words)Essay
Unit Contribution Margin
Assessing the influence on earnings of changes in sales. In particular, it can be used to estimation the decline in profits if sales drop, and so is an standard tool in the making of budgets.
2 Pages(500 words)Essay
Let us find you another Essay on topic C-V-P equation.Contribution margin for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us