Managers use cost volume profit analysis to answer, “what if” scenarios. For example, what if a manager wanted to know how many units the company must sell to make a profit that month? How much should each unit be priced at to make a certain amount of money?
To determine these answers and others like them, a cost volume profit analysis is carried out. One example of a cost volume profit analysis is a breakeven analysis. A breakeven analysis distinguishes between fixed and variable costs to determine the number of units that need to be sold to reach the desired target.
This discussion addresses the following module outcomes:
- MO1: Apply CVP analysis to decision making (CO3)
- MO2: Analyze breakeven point to target operating income (CO3)
Please review all readings and viewings prior to starting your discussions and homework.
Next, address the following in your initial post:
- Explain how Cost Volume Profit Analysis can be applied in business.