...Cost-Volume-Profit (CVP) Analysis Shanica N. Todd-Higgins ACC/561 - ACCOUNTING Instructor: DAVID DUREN Schedule: 06/29/2015 - 08/03/2015 Campus: COLUMBIA SOUTH CAROLINA CAMPUS Group ID: SCMBA0914 CVP - What If Analysis Through research, according to Diane Wicks (2015), “Cost-volume-profit (CVP) analysis is used to assess the impact of potential changes in costs and volume on a company's operating profit and net profit. CVP analysis is also useful in making decisions regarding pricing of products, selection of product lines and utilization of production equipments. Additionally, CVP is at the heart of methods used for calculating the break-even point and sales levels necessary to attain targeted income levels.” The break-even point according to W.D Adkins (2015) is, “the point at which revenues are just enough to cover expenses so there in no profit and no loss.” For instance Calculating Breaking-Even Analysis There are many steps in finding the break even analysis. According to Zari Ballard of Ehow (2015, ), First, calculate the total fixed costs by adding together each of the company's fixed costs. For example, a small company with annual fixed costs of $7,000 in rental payments, $3,000 in equipment leases and $30,000 in administrative salaries would have TFC of $40,000. Next, calculate the contribution margin per unit by subtracting the variable cost per unit from the sales price per unit. For example, if a small company's product sells for $60 per unit with...
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...With a plethora of issues facing our planet, many non-profit organizations have been established in recent years in order to aid people in need. These non-profit organizations ranging from health services to Education services with big names such as Doctors without Borders and The Global Partnership for Education. With so many Organizations and sectors that need our attention I found myself in a dilemma trying to decide which one of these large nonprofits was best suited to my interest in contributing, however, the more I looked into their projects the more I realized that the projects would be near impossible to attend with my high school schedule so I began looking into more localized projects. I began to start routinely visiting a school...
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...Target Profit And Break Even Analysis; Case 4-33; Managerial Accounting Case 4-33: Cost Structure; Target Profit and Break Even Analysis Question 1: Compute Pittman Company’s break-even point in sales dollars for next year assuming: a. The agents’ commission remains unchanged at 15% $12,000,000 in sales is needed to break even while employing an outside sales force with commissions of 15% of sales. b. The agents’ commission rate is increased to 20% $13,714,286 in sales is needed to break even while employing an outside sales force with commissions of 20% of sales. c. The company employs its own sales force. $15,000,000 in sales is needed to break even while employing the company's own sales force with commissions of 7.5% of sales. Before Pittman Company’s break-even point in sales can be determined, we must initially “reformat” the provided Budgeted Income Statement for the Year Ended December 31 (for the next year) to reflect a Contribution Income Statement format. The reason for this application is to separate the Variable and Fixed costs associated in selling telecommunications equipment to derive pertinent data needed to determine break even sales. The restructuring of each Income Statement may be found in Appendix A of this report. Reformatting the Income Statement allows us to determine first, the Contribution Margin. The Contribution Margin is significant in determining Break-even point whether by the number of units to break even...
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...Analysis of Personal and Organizational Ethics and Values between For-Profit and Not-for-Profit Organizations Monte Mutu PHI 445 – Personal & Organizational Ethics J. R. Ewing July 21, 2003 Our personal needs are meet by our human desires to generate a profit or seek assistance in managing profit. Even though both the Not-for-Profit and For-Profit organizations benefit our social economy by providing financial assistance to various social classes, both types of profit organizations must continue to uphold and maintain their values and standards at the highest level possible. Both profit organizations also have a responsibility to its customer base to live up to their actions simply by recognizing their purpose, owning up to their faults and conducting business in a professional and ethical manner. Lets take a look at the two types of profit organizations, the Navy and Marine Corps Relief Society and the Pepsi-Cola Company Inc. The Navy and Marine Corps Relief society is a non-profit organization headquartered in Arlington, Virginia. The Navy and Marine Corps Relief Society has approximately eighty-five branch offices located throughout the United States and eleven countries worldwide with a staff of 169 personnel, over 3,700 volunteers and over 50 nurses combined working diligently to provide assistance at moments notice. The Navy and Marine Corps Relief Society provides financial assistance and education to service members of the United States Navy, the Marine...
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...CHAPTER 3 COST–VOLUME–PROFIT ANALYSIS Selected Solutions NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 3-16 (10 min.) CVP computations. | | |Variable |Fixed |Total |Operating |Contribution |Contribution | | |Revenues |Costs |Costs |Costs |Income |Margin |Margin % | |a. |$2,200 |$ 800 |$400 |$1,200 |$1,000 |$1,400 |63.64% | |b. |2,400 |1,300 |400 |1,700 |700 |1,100 |45.83% | |c. |900 |500 |400 |900 |0 |400 |44.44% | |d. |1,800 |900 |400 |1,300 |500 |900 |50.00% | 3-17 (10–15 min.) CVP computations. 1a. Sales ($68 per unit × 410,000 units) $27,880,000 Variable costs ($60 per unit × 410,000 units) 24,600,000 Contribution margin $ 3,280,000 1b. Contribution margin (from above) $3,280,000 Fixed costs 1,640,000 Operating income $1,640,000 2a. Sales (from above) $27,880,000 ...
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...Bridgestone Health Center: Cost-Vume-Profit(CVP) Analysis for Planning and Control A business Case Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements In MODMGT1 Submitted to: Ms. Katherine Chua Submitted by: Ferrer, Jan Alyssa Dennise Madamba, Ann Tan, Baron Vergara, Maria FRancesca In the vast changing business environment, organizations have kept a single grip trying to cope up with the differing demands required from them. Stability has been the rising issue; hence business continuance is put to test. Questions such as, “will my revenue match up with my cost?” or “Do my business profit from this?” These issues do not only involve profit generating entities but non-profit organizations as well. It is a common mistake that non-profit organizations are supposedly to earn just enough to compensate for the expenses incurred. But, truth is, non-p[profit organizations, need as surplus to survive the demands of a business. This would equip these nonprofit organizations from future contingencies and problems. In the business case provided, Bridgestone Behavioral Health Center, is a non-profit rehabilitation hospital. The said entity caters patients suffering from drug or addiction. The entity has a varied services offering to both checked-in patients and Out-patients. The said services are as follow: Patient Assessment, Lab Urinalysis, Case , Group Counseling, Individual Counseling, Crisis, Intensive Medical Somatic...
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...Chapter 9 Profit Planning: Cost-Volume-Profit Analysis Cases |9-1 |Cost-Volume-Profit Analysis and Strategy | |9-2 |Cost-Volume-Profit Analysis and Cost Estimation | |9-3 |Cost-Volume-Profit Analysis and Strategy | |9-4 |Cost-Volume-Profit Analysis and Strategy: The ALLTEL Pavilion | |9-5 |Sensitivity Analysis; Regression Analysis | |9-6 |Profit Planning: Choice of Cost Structure | |9-7 |Pancake World | Readings 9-1: “Tools for Dealing with Uncertainty” by David R. Fordham, CMA, CPA, Ph.D and S. Brooks Marshall, CFA. DBA This article explains how to use simulation methods within a spreadsheet program such as Excel to perform sensitivity analysis for a given decision context. The available spreadsheet simulation software systems include the programs Crystal Ball and @Risk, among others. These software systems allow the user to analyze the effect of uncertainty on the potential outcomes of a decision. These tools can be applied directly to CVP analysis. The tools allow...
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...The transition from elementary school into middle school is a difficult switch for preadolescent individuals. Preadolescent individuals are experiencing many difficult changes in their lives at this point in time, such as physical, emotional, and cognitive changes. Transitioning from elementary school into middle school can also be quite scary for young children. It is vital for preadolescents to have the necessary resources to aid in their transition. Unfortunately, many low-income families do not have those vital resources, such as time, support, and money, to name a few. ‘“Follow the Lead”’ is an intervention based afterschool mentoring program targeting low-income preadolescents in order to provide a safe and encouraging environment for individuals to help with academics, social, and behavioral issues. Two studies, one on the importance of mentors and one on the benefits of afterschool programs for early adolescents, will be examined to provide support for “Follow the Lead”. The focus of the “Follow the Lead” program is to help preadolescent elementary students transition into middle school with ease, particularly 4th and 5th grade students. A reason behind this specific targeted group is because of the unique changes preadolescents face at this time. With this new transition coming up, afterschool programs are seen to help preadolescents with this transition because they act as intermediary environments or safe environments where children are able to create their own identity...
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...CVP Analysis is a powerful tool managers use; as it helps them in understanding the interdependency or relationship between cost, volume and profit in an organization mainly by focusing on interaction between elements such as a: Product Price b: Level or volume of activity c: Per unit variable cost d: Total fixed costs e: Mix of products sold. Assumptions: The cost volume profit analysis assumptions suggest that the selling price does not change and remains constant as the volume changes. As costs are liner as a result of which they can be accurately divided into variable and fixed element. The fixed element remains constant in total over the relevant range and the variable element is constant per unit. On the other hand when considering multi-product companies, the sales mix is constant. Limitations of CVP Analysis It is limited in the amount of information it can provide in a multi-product operations. Multi-product businesses, such as restaurants, can have a difficult time with CVP analysis because menu items, for instance, are likely to have many variable cost ratios. This makes the challenge of CVP analysis all the more difficult because it must be done for each specific product. As it is a short run, marginal analysis therefore it assumes that unit variable costs and unit revenues are constant, which is appropriate for small deviations from current production and sales, and assumes a neat division between variable and fixed costs but in the long...
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...Cost-Volume Profit Analysis Cost-Volume-Profit (“CVP”) analysis is essential for any company to be able to determine break-even points, and determining short term decisions. Arguably, for small businesses, nothing could be more important, as CVP provides the minimum volume of a product needed to sell in order to experience neither a gain nor loss. For entrepreneurs it is important to be effective and efficient when utilizing CVP accounting processes. This provides the framework for analyzing CVP’s importance to entrepreneurs. Defined, cost-volume-profit analysis is “the study of the effects of changes in cost and volume on profits” (Kimmel, 2011). CVP is critical in profit planning, determining selling prices, and helps determine the minimum number of future sales. Underling CVP are the assumptions that both cost and revenues are linear, costs can be classified as either fixed or variable, and one changes in activity or volume affect costs (Kimmel, 2011). CVP helps entrepreneur’s asses how much contribution is made on each product and how many units to sell in order to cover fixed costs. “[CVP] can [also] be used to determine whether efforts would be better directed toward the reduction of fixed costs or of variable costs” (Crowningshield, 1986). Margin of Safety as it relates to cost-volume-profit measures the difference between actual sales and the break-even point. Margin of safety enables management to determine allowable sales risk when introducing...
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...beginning to show their age and a need for newer types of operations to compete with foreign firms emerging, PeopleSoft was looking for a way to create a profitable company. Both founders saw the opportunity of enterprise resource planning as a new technology which would take off in future years.[2] The takeover of PeopleSoft by Oracle was a long and complicated legal and public opinion battle. The takeover itself had several reasons but one was the most significant. To begin Oracle was increasingly finding it was in a market which was becoming more competitive. As technologies age and patents expire new firms are taking market share away from the dominant firms. As the newer more competitive firms began to succeed, Oracle began to see profit margins decrease. Oracle was being forced into a corner with few choices for successful operations in the future. The maturing market which it found itself a part of was not going to bring it the same level of...
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...information to be used by the managers to run the business more effectively. This information can be used in decision making, planning, and control. Management accounting is dealt with in another module of your course. Management Accounting is an integral part of management activity concerned with identifying, presenting and interpreting information used for the following: • Formulating strategy • Planning and controlling activities • Decision making • Optimising the uses of resources Key Definitions a) Cost unit- the cost of an item a product or service. This could be a single item, a batch, a contract what ever is appropriate for the organisation. b) Cost classification - to group costs for analysis and control purposes c) Cost centre - a function or location for which costs are ascertained dividing into production (primary) and service (secondary) areas. 1. THE...
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...TABLE OF CONTENT Executive summary……….………………………………………………………2 Background…………………………………………………………………3 Analysis of company situation………………………………………………....4-8 Analysis on market situation...............…………………………………….....9-12 Swot and competitor analysis ………………………………………………12-15 New product for McDonalds………………………………………………...15- 19 Future marketing strategy..................................................................................19-21 Financial forecast............................................................................................21-22 Conclusion……………………………………………………………......22 Appendix …………………………………………………………..........23-24 References…………………………………………………………….....25 INTRODUCTION Health care system is critically important around the world. And health care industry has always been a subject area with a strong international dimension. The health-care industry incorporates several sectors that are dedicated to providing health care services and products. According to industry and market classifications the health-care industry includes health care equipment and services as well as pharmaceuticals, biotechnology and life sciences, nursing homes, providers of health care plans and home health...
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...Non-Profit Analysis Project Michele Holt Liberty University BUSI 602-B02: Non-Profit Management Professor Dr. Marjorie Carlson Hurst July 6, 2012 Author Note This paper was prepared for Non-Profit Management, Section BUSI 602, taught by Professor Dr. Marjorie Carlson Hurst. Abstract The roots of America’s nonprofit, steam from the ancient traditions of charity, philanthropy, and voluntarism (Worth, 2012, p. 19). Charity can be defined as giving intended to meet current individual human needs or to alleviate current human suffering (Worth, 2012, p. 20). Volunteerism is defined as a very active process that requires active involvement with either the beneficiaries directly or an organization or group that serves a specific population in need (Worth, 2012, p. 20, 21). Virtually all cultures and religion include some emphasis on the importance of service to others, which includes giving or voluntary action (Worth, 2012, p. 19). The Bible teaches us, “Then the righteous will answer him, Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? When did we see you a stranger and invite you in or needing clothes and clothe you? When did we see you sick or in prison and go to visit you? The King will reply, truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me” (Matthew 25:31-46, NIV). This paper will examine the importance of a Christian worldview as it relates to nonprofit...
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...Do you own a restaurant and you're thinking about expanding your outdoor area? Maybe you need a larger kitchen than the one you currently have? In order to make sure that things are done properly, you're going to want to hire a contractor to oversee the whole project. If you've never hired a commercial contractor before, it can seem confusing when you try to chose between the ones that are available. But here are some questions you can ask to help make sure that you get the right contractor for the job: Have you done any projects like this before? A good commercial contractor will be able to help you with all aspects of your expansion. If you are expanding your outdoor seating area, he or she can often find and install tables and chairs that...
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