A key feature of cost/volume/profit analysis is that it can help you
answer the following questions:
Do you know what your most profitable products or services are, so
that you (or your salespeople) can really push those? Do you know what
will happen if your sales volume drops? How far can it drop before you
really start to eat red ink? If you lower your prices in order to sell
more, how much more will you have to sell? If you take out a loan and
your fixed costs rise because of the interest on the loan, what sales
volume will you need to cover those increased costs? And more.
It is basically a method of examining the relationship between your
fixed and variable costs, your volume, and your profits.
The three pieces of information that CVP offers is:
1. A breakeven analysis, telling you what volume of sales is required
to break even at a certain price/cost scenario.
(http://www.toolkit.cch.com/text/P06_7530.asp)
2. Contribution Margin Analysis, comparing the profitability of
various products (http://www.toolkit.cch.com/text/P06_7520.asp)
3. Operation Leverage, the degree to which your business uses fixed
costs, the factors affecting your sales increase and decrease.
http://www.toolkit.cch.com/text/P06_7540.asp
More information can be found using the google search:
://www.google.ca/search?q=cost+volume+profit+analysis&ie=UTF-8&oe=UTF-8&hl=en&meta=
Hope that helps.
-Tox-ga |
