Who can know the endless hours of struggle when trying to understand about cost volume profit analysis better than a finance student? I can understand the strain that you are bearing regarding your finance homework as I had been in your shoes too. However, where there is a problem regarding cost volume profit analysis homework answers, remember, there also are numerous solutions.
So, without delaying any further, let’s jump in and know about the essential factors that you should include as your answers for cost volume profit analysis.
6important aspects related to cost volume profit analysis
- Understanding cost volume profit analysis
In order to understand how any change in volume or cost can influence of expenditure of operation, a majority of companies use cost volume profit analysis. This is also helpful in determining the net income that is involved in it.
- Various elements associated with cost volume profit analysis
It is not just writing about the basic concept that can help you with the stress of homework or assignment on this topic. There are also other factors that you have to include after the basic explanation. The next in line are mainly 3 elements of primary significance. They are:
- Profit
This relates to the distinction between a product’s service charges or production charges that are involved in the manufacture and its cost related to selling of those products.
- Volume
This can be expressed as the units in totality that are manufactured in case of a physical product. Again, you should also not forget the value of volume in case of service that is calculated here.
- Cost
It denotes expenditure that is incorporated into a service or a product that has been manufactured or is kept for selling.
- Miscellaneous assumption on its utilization
Cost volume profit analysis is mainly used by managers to make important decisions in their business. There are varied assumptions that are important to be showcased as your cost volume profit analysis homework answers. Some of the assumptions include:
- Productions of units are made so that all of them can be sold
- There are no changes in total fixed costs
- Uniformity can be witnessed for sales price of individual units
- It is only due to the change in activities which leads to varied effect in costs
- If an individual firm manufactures more than a single product to sell all in the market, it is in the same mix that you will find for all those items
- You will also find consistency invariable costs for individual units
- Basic formulation for cost volume profit analysis
One of the chief things that you need to consider for cost volume profit analysis homework answers is inclusion of formula. This helps to justify the terminology that you are describing. Formula for cost volume profit is expressed as the price of individual unit. It is then multiplied by a sum of variables which is equivalent to sold units. These variables comprise of:
- Accounting profit
- Total fixed costs
- Total variable costs
Now, when we are considering about the variable cost in totality, it depicts variable cost of individual units which again is multiplied by sold units.
- Advantages of cost volume profit analysis
An excellent form of managerial accounting technique, cost volume profit analysis has many benefits. Some of them include:
- Comprehension
Unlike other accounting technique, cost volume profit analysis does not have complicated terms or jargons. Its interpretation is simple,and the preparation is comprehensible for anyone. Its cost concept is easy to understand and used by both small scale and large scale business owners. It also ensures that you understand the behavioral aspect of cost.
- Inflexibility
Every company wants a technique which they can use easily and swiftly. As it is on various assumptions that this technique stands on, the elements and details are more on the rigid side.On the basis of cost volume profit analysis that a company can determine quantity of items that require to be produced so that the selling quantity remains constant if not on the higher side.
- Easy computation methodology
It is one of the major advantages when it comes to calculation. There are only standardized formulations when companies apply cost volume profit analysis. If seen in ageneralized sense, there is a standard pre-designed table. You are required to input a variable into the designated slots,and the rest is done automatically.
- Utilization of this technique
Cost volume profit analysis homework answers cannot be complete without explaining about its utilization.
- This analyzing technique is used by many accounting professionals and firms so that they can they can implement it for their informed decisions.
- Cost volume profit analysis plays important roles in both financial accounting as well as managerial accounting. But, its inclination is mostly towards the latter than the former one.
- It is also helpful in selling various services and products.
- Assumptions can be made regarding the financial aspect of any organization and projected to other outside financial bodies.
- It is highly effective in taking cost-effective and smart moves when running a business.
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