ACG 5075 Keiser University Cost Volume Profit Relationships Paper Write a 2-page paper on Cost Volume Profit Relationships (using APA 7th ed formatting) an

ACG 5075 Keiser University Cost Volume Profit Relationships Paper Write a 2-page paper on Cost Volume Profit Relationships (using APA 7th ed formatting) and include a cover page and a reference page. You should have a minimum of three references (and remember to use citations in the text to match the references). Find the paper template in the Getting Started menu under Course Resources.If you submit this assignment to the free Keiser University Writing Studio by midnight on Sunday, then you can have 2 days after you get feedback to revise your work before you submit to be graded. It will be considered submitted on time.Articles from 2009 – present only. Use your online library. No Wikipedia, BLOGS with Ads from Yahoo, UK Essay Buzzle.com, or sites that challenge as they present a biased opinion. Google Scholar is accepted. Running head: COST VOLUME PROFIT RELATIONSHIP ASSIGNMENT
Cost Volume Profit Relationship
ACG 5075 Accounting for Decision Makers
Dr. Cezair
May 23, 2020
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COST VOLUME PROFIT RELATIONSHIP ASSIGNMENT
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Cost Volume Profit Relationship
Managers have many critical operating decisions to make that affect a company’s
profitability. Managers are usually interested in the impact a product or service will have on
profitability. Company managers can use a variety of systems to analyze how to utilize their
company resources. One of the essential managerial tools used in management decision making
is the Cost Volume Profit Analysis (CVP). The primary purpose of the cost-volume-profit
analysis is to predict affected profits by following five factors: selling prices, sales volume, unit
variable costs, total fixed costs, and mix of products sold (Noreen, Brewer & Garrison 2020).
CVP examines the relationship between costs and profit to the volume of business to maximize
the company’s profit (Kavitha, 2018). The three elements determine creation value for a
company in the long run. Therefore, understanding cost and the volume provides the business to
manage their profit efficiently, the fundamental elements of CVP concept are:
Cost: Each business acquires the initial cost and also as it carries out its business. Costs
are the type of related expenses to make the product or providing a service (Kavitha, 2018).
Volume: volume is how much the product will produce or sell. Each business has to
know how much to sell to determine how much to produce (Kavitha, 2018).
Profit: Each business has to know its generated profit by the amount of product or service
delivery made to customers. Usually, the determined profit is the product’s selling price rather
than the cost of manufacturing the product (Kavitha, 2018).
One formula used for Cost-Volume-Profit Analysis is:
Contribution = selling price per unit – variable cost per unit
COST VOLUME PROFIT RELATIONSHIP ASSIGNMENT
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Break-even sales (units) = fixed cost ÷ contribution per unit
Profit target (units) = (fixed cost + profit target) ÷ contribution per unit
Margin of safety (percentage) = (target sales – break-even sales) x 100
break-even sales (Grahame, 2005).
The beginning of CVP analysis is to determine any project’s break-even point, which is
the sales figure (sometimes in unit) that will produce neither a profit nor a loss. First, we need to
distinguish which costs are fixed and which costs are variable (Grahame, 2005). Fixed cost is the
number of sales; variable cost is the amount or volume of a product produced. Secondly, we need
to calculate the contribution, which is the money we made on the product. Then, the fixed cost is
totaled. Finally, we calculate the break-even point by dividing the total fixed cost by the
contribution (Grahame, 2005). In the break-even point a business experiences no profit or loss.
A break-even point scenario can be stated as a business with $100,000 in fixed cost, and a
contribution margin of 40% must earn a revenue of $250,000 to break even (Trifan & Anton,
2011). A profit scenario can be a business’s desired profit of $50,000, the total revenue of sales is
found by dividing $150,000 by the contribution margin of 40%, the yield required sales revenue
of $375,000 (Trifan & Anton, 2011).
Overall, business managers can use the cost, volume, profit analysis to calculate the profit
total by the product sold. Management may set a sales level to earn a total desired profit by using
the CVP. Moreover, the CVP may be used to increase production capacity and advanced
technology to lower the production cost in order to increase the profit and volume. CVP analysis
helps analyze the profitability according to the cost and volume of sales to prevent the future
risks of a business.
COST VOLUME PROFIT RELATIONSHIP ASSIGNMENT
References:
Grahame, S. (2005). Management accounting fundamentals. Financial Management,51-52.
Retrieved from https://search.proquest.com/docview/195700640?accountid=35796
Kavitha, R. (2018). Cost Volume Profitability Analysis -An Empirical Study with Reference to
Salem Steel Authority of India Limited (SAIL), Tamilnadu. In International Journal of
Business and Management Invention (IJBMI) ISSN (pp. 46–51).
https://www.ijbmi.org/papers/Vol(7)5/Version-2/H0705024651.pdf
Noreen, E.W., Brewer, P.C. & Garrison, R.H. (2020). Managerial Accounting for Managers.
5th edition. McGraw-Hill + e-book + Connect + Learn
Trifan, A., & Anton, C. (2011). USING COST – VOLUME – PROFIT ANALYSIS BY
MANAGEMENT. Bulletin of the Transilvania University of Brasov.Economic
Sciences.Series V, 4(2), 207-212. Retrieved from
https://search.proquest.com/docview/1000454985?accountid=35796
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