Cost-Volume-Profit Analysis Homework Help
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Cost-Volume-Profit Analysis, also known as CVP analysis is a management process that is used for mapping the business activity of a company. It is a method that is used for taking the short run decision of business. It calculates how changes in sales activity can be profitable for a company.
CVP Analysis is determined by fixed cost, variable cost and break-even point (a level at which there is neither profit nor loss) of cost. It is used to simplify the way of taking important decisions in business. Students, who wish to pursue their career in the business sector, definitely have to know about the execution of this theory in the corporate world.
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Factors of CVP Analysis
- Level of sales activity
- Total fixed cost
- Variable cost of a product per unit
- Selling price per unit
All these factors are taken together to calculate for this analysis. Some assumptions are also considered for this analysis. They are:
- One should work with variable or fixed cost particularly
- Three things are constant – Selling price per unit, variable cost per unit and total fixed cost
- All units produced are sold
- In case an enterprise produce different types of products, the product mix is constant
CVP Analysis – Mathematical Representation
The basic formula that is used here is:
px = vx + FC + Profit
In this formula,
p = price per unit
v = variable cost per unit
x = total number of unit of product that is produced and sold
FC = total fixed cost
Besides this basic formula, there are two key factors which are important for this calculation.
a)Contribution Margin (CM)
b) Contribution Margin Ratio
Contribution Margin is obtained by calculating the difference between a total sale and total variable cost. If we work with per unit cost, then we obtain Unit Contribution Margin.
Contribution Margin Ratio is the result of contribution margin divided by total sales. You can also avail such detailed and step by step descriptions in your assignment. All you need to do is to contact us for Cost-Volume-Profit Analysis Assignment Help.
Obstacles of CVP Analysis
Our Cost-Volume-Profit Analysis Homework Help experts point out the limitations of CVP. All the calculations of CVP are done after some assumptions as said before. We consider some factors are constant.
In reality, it is observed that some of the costs are not always fixed. Moreover, as it is only applied for a limited period study, it is not always applicable for the long run.
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