cost volume profit analysis
Question 2
Cost Volume Profit Analysis
1.0 Introduction
According to Jon Scheumann “a successful organizations need a culture that is attuned to cost management and pay attention to cost structure”
From that statement manager must pay attention and carefully thinking when do decision making to the cost. For example when manager want to target the profit. They must take every cost that related in production such as variable cost and fix costs.
Cost Volume profit analysis is used in decisions making in a company. The reasons why used cost volume profit analysis as a method to make decisions making because it helps manager to estimate future cost, revenue, expenses and profit that helps them to monitor the level of activity in production and monitor the plan. Besides that when used CVP analysis we can identify monitor the activity level and make analysis to avoid loss, find a target profit and maximize the production of unit. Moreover CVP analysis can help manager to identify the risk and effect for their decision making and a technique to analyse the profit change bases on sales volumes, costs, and process.
When do CVP analysis the manager can get the information like the product that want to analyse the volume is required to achieve a certain level of profit total of revenue is needed before the company will incurred loss(break event point)
Those fix cost can effects the organization to an unacceptable level of risk.
a) A break – even analysis must be interpreted in the light of the limitations of its underlying assumption …… (From Cost Accounting: A managerial Emphasis, by C.T. Horngren)
2.0 Introduction to Assumption
What is assumption? Assumption is something like a rule is must be made or a certain item be ignore when do assumption in CVP analysis. Why need to do assumption in CVP analysis? There is a limitation of CVP analysis. The effectiveness of CVP analysis must be done with assumption in order to make CVP analysis is useful when
Cost Volume Profit Analysis
1.0 Introduction
According to Jon Scheumann “a successful organizations need a culture that is attuned to cost management and pay attention to cost structure”
From that statement manager must pay attention and carefully thinking when do decision making to the cost. For example when manager want to target the profit. They must take every cost that related in production such as variable cost and fix costs.
Cost Volume profit analysis is used in decisions making in a company. The reasons why used cost volume profit analysis as a method to make decisions making because it helps manager to estimate future cost, revenue, expenses and profit that helps them to monitor the level of activity in production and monitor the plan. Besides that when used CVP analysis we can identify monitor the activity level and make analysis to avoid loss, find a target profit and maximize the production of unit. Moreover CVP analysis can help manager to identify the risk and effect for their decision making and a technique to analyse the profit change bases on sales volumes, costs, and process.
When do CVP analysis the manager can get the information like the product that want to analyse the volume is required to achieve a certain level of profit total of revenue is needed before the company will incurred loss(break event point)
Those fix cost can effects the organization to an unacceptable level of risk.
a) A break – even analysis must be interpreted in the light of the limitations of its underlying assumption …… (From Cost Accounting: A managerial Emphasis, by C.T. Horngren)
2.0 Introduction to Assumption
What is assumption? Assumption is something like a rule is must be made or a certain item be ignore when do assumption in CVP analysis. Why need to do assumption in CVP analysis? There is a limitation of CVP analysis. The effectiveness of CVP analysis must be done with assumption in order to make CVP analysis is useful when