Question

What are CVP relationships and why is the break-even point important to these relationships, also what...

What are CVP relationships and why is the break-even point important to these relationships, also what factors must be considered in determining a break-even point, and What type of events affect a break-even point?

Homework Answers

Answer #1

In order to understand the relationship between cost , volume and profit we use Break Even Point Analysis(BEP). BEP technique focuses on how selling price, sales volume , variable costs , fixed costs and the mix of the products effects profit.

Break Even Point (in units)= Fixed costs/ contribution per unit.

Break Even Point (in $). = fixed costs / PV ratio

This is the level of sales at which the company neither incurs profit nor losses, ie all costs incurred are equal to sales .

To calculate BEP, we need to calculate PV ratio or contribution margin ratio. Ie contribution divided by sales .

Types of events affecting BEP:

1. market demand ie it effects sales volume

2. START UP costs

3. Classification of variable and fixed costs.

4. Pricing strategies .

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the meaning of break-even point? Explain why this calculation is important to management.
What is the meaning of break-even point? Explain why this calculation is important to management.
Explain break-even analysis. Why is it important to do a break-even analysis? What are some of...
Explain break-even analysis. Why is it important to do a break-even analysis? What are some of the staffing responsibilities for a HIM manager?
1. What is CVP? 2. Under what conditions would management monitor the variables of the CVP...
1. What is CVP? 2. Under what conditions would management monitor the variables of the CVP and why? 3. What important uses can CVP be utilized? 4. With both the mathematical calculations and the graphical ones what does the break even point provide management?
: Explain why Break-even point analysis is important in planning for decision makers. please answer in...
: Explain why Break-even point analysis is important in planning for decision makers. please answer in your words
In a cost volume profit analysis, what happens at the break even point and why companies...
In a cost volume profit analysis, what happens at the break even point and why companies do not want to remain at the break even point?
In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do not...
In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do not want to remain at the break-even point..
What are sensitivity analysis, scenario analysis, break-even analysis, and simulation? Why are these analyses important, and...
What are sensitivity analysis, scenario analysis, break-even analysis, and simulation? Why are these analyses important, and how should they be used?
1. CVP Analysis; Break-even point, margin of safety: Davies’ Violins, Ltd, produces and sells a single...
1. CVP Analysis; Break-even point, margin of safety: Davies’ Violins, Ltd, produces and sells a single product, violins, whose selling price is $175.00 per unit and whose variable cost is $62.00 per unit. The company's fixed expense is $15,430 per month. The current volume of sales is 200 violins per month. Determine the monthly total contribution margin at the current volume of sales. Determine the monthly net income (loss) at the current volume of sales. Determine the monthly break-even point:...
1. (a). What is the break-even point, explain with a good example and a diagram (2...
1. (a). What is the break-even point, explain with a good example and a diagram (b). A company sells a product at $35 per unit. The variable cost for the product is $30 per unit and its fixed cost is $70,000 i, what is the quantity the firm must sell to break even ii what is the break-even point in dollars
Where is the break-even point located in a CVP graph? a. At the intersection of the...
Where is the break-even point located in a CVP graph? a. At the intersection of the variable cost line and the fixed cost line. b. At the intersection of the mixed cost line and the sales line. c. At the intersection of the sales line and the fixed cost line. d. At the intersection of the total cost line and the sales line. When using the weighted-average method, equivalent units are a. the number of units produced in a period...