Professor Notes:
Excellent work on this paper. You have included all the necessary items needed to describe the CVP analysis. Also when writing the paper try to use some examples of corporation that use these different analysis to help the correlation of the paper to show your understanding of the material.
Overall Points Earned 30/30
Learning Team B: Cost Volume Profit Analysis (CVP)
Jim Crarns, Beth Black, Amanda Kreps
ACC 561
July 7, 2015
Professor Rebecca Love
Learning Team B: Cost Volume Profit Analysis (CVP)
Introduction
Cost Volume Profit Analysis (CVP Analysis), an Accounting method that provides information concerning the relationships between cost, volume and profit. It is necessary to know how costs behave, to understand cost volume profit. (Kimmel, Weygandt, & Kieso, 2011). In addition, CVP determines the metrics that gives insight into the present and future performances or outlook of the company. The CVP analysis uses margin analysis; breakeven analysis and operating leverage determine the metrics that give present and future insights. Before a corporation uses CVP analysis, they need to know the variable costs and fixed costs of the enterprise.
Variable costs increase directly in proportion to the level of sales in dollars or units sold. Examples of variable cost are the cost of goods sold, billable staff wages, delivery charges, and costs of raw materials or supplies. Fixed costs stay the same despite your level of sales. Examples fixed cost include rent, utility bills, employee salaries. In essence, CVP is beneficial and essential for planning and management decision making.
Margin Analysis
Another aspect of cost volume profit is contribution margin that looks at the profitability of the products a company sells. In margin analysis, there is a correlation between similar companies with comparable products and services. A company's contribution margin remains after the deduction of variable costs from the...