In this chapter, we will explore how managers can use cost-volume-profit analysis to make a wide range of decisions about their business operations.
- 3.2: Calculate a Break-Even Point in Units and Dollars
- You haved learned how to determine and recognize the fixed and variable components of costs, and now you have learned about contribution margin. Those concepts can be used together to conduct cost-volume-profit (CVP) analysis, which is a method used by companies to determine what will occur financially if selling prices change, costs (either fixed or variable) change, or sales/production volume changes.
- 3.3: Perform Break-Even Sensitivity Analysis for a Single Product Under Changing Business Situations
- Finding the break-even point or the sales necessary to meet a desired profit is very useful to a business, but cost-volume-profit analysis also can be used to conduct a sensitivity analysis, which shows what will happen if the sales price, units sold, variable cost per unit, or fixed costs change. Companies use this type of analysis to consider possible scenarios that assist them in planning.