Cost-volume-profit analysis (CVP) is a tool that breaks down the relationship between costs, production volume, and profits. It is useful for planning and decision making. Variable costing focuses on costs that vary with production volume like materials and labor. It provides information on costs per unit and contribution margins. Managers can use CVP and variable costing together to determine break-even points, decide whether to expand or reduce production, and evaluate options like purchasing vs manufacturing products. The analyses rely on assumptions like fixed and variable costs being accurately classified.

1. As a manager, discuss how you would use or have used the
concepts
1) Cost-Volume-Profit Analysis
2) Importance of Profit- cost- volume analysis
3) Variable Costing in Planning
4) Importance of Variable costing
Instrcutions:
1) Original post for two different topics total 600 words
2) 3 Responses to classmates = 450 words total
3) 3 articles/peer reviewed references for one question and 3
Articles/Peer Reviewed references for other question.
4) Citation required in the body.
5) APA format
Response#1(Mahesh)

2. Cost-Volume-Profit Analysis is observed as the employment of
a model that helps in breaking down the complexity that exists
between cost of production and operation, quality of goods
produced, and the profits generated from the whole undertaking
(Lulaj & Iseni, 2018). CVP takes into consideration the
influence each aspect of operation or production unit has on the
running of an organization. It stipulates the expenses that are to
be incurred in a given operation by considering the fixed and
variable costs that come with production of a good or a service
or yet the sale of a product. This makes it an essential tool in
the control of budgetary allocation in an organization as it
provides the necessary information that gives direction on the
combined activities that are likely to add value to an investor's
capital (Serfling, 2016). A major example may be stipulated in
the production of a food product, which seems to gain demand
on weekends. In such a case, the business producing the product
will commit its resources elsewhere during the weekday to
optimize on the scarce resources and avoid drowning in
expenses example fixed costs such as rent and utilize its
production unit to meet the accruing demand on weekends.
Thus, it is without a doubt to state that CVP Analysis is a major
tool of planning used in managing risks, optimizing on the
scarce resources which are all essential in enhancing customer
satisfaction (Lulaj & Iseni, 2018). Essentially, CVP provides
information that is crucial in the control and planning of
production, among other operational activities in an
organization.
Variable Costing
Variable costing revolves around the assigning of the period and
product costs in regards to a given kind of product. Researchers
observe that it is an essential approach in internal reporting due
to its ability to break the complexity that comes along with an
organization’s operation and production (Creese, 2017). It

3. addresses costs product costs related to manufacturing and
specifically those that can be directly attributed to a product. In
this case, it provides enough information that is crucial in
controlling the production sector and makes plans through
strategies such as budgetary allocation (Serfling, 2016). This is
so in that it provides the relationship between the expected and
actual costs and through this it becomes easier for the
management to schedule their operations, which’s crucial in
maximizing the possible profits.
Cost-Volume-Profit Analysis and Variable Costing in Decision
Making
Cost-Volume-Profit Analysis
Cost-Volume-Profit Analysis is a model that is used to break
down the relationship that exists between the three major
factors in an operation that is quality of the product, the costs
of production and the margin accrued upon sale of the good or
service being accrued (Boyd & Pitre, 2019). CVP provides the
necessary information that helps determine whether a certain
production line ought to be expanded or reduced. This may be
evidenced in a scenario in which a company is considering
expanding its market operations as a result of an increase in
demand for its beverage product. However, the cost of raw
materials has increased, which is a major blow to the company
in that if it increases its sale price, there is likelihood that it
will lose its customers (Clifton et al. 2019). Nonetheless, the
procurement manager has realized that the purchase of raw
materials in bulk may lower the total cost associated with the
input process. However, the marketing manager realizes that the
profits are bound to shrink. The CVP analysis carried out shows
a positive result in that increasing production will increase the
profits in the long run as fixed costs have not changed (Clifton
et al. 2019). Thus, the management may decide to go ahead and

4. increase their production which will be crucial in increasing
their profits due to an increase in the market for their
beverages.
Variable Costing
Variable Costing provides the behavior of costs under various
conditions triggered by internal and external factors. It can be
employed together with CVP analysis to provide the variable
components that come with changes in production units, product
mix, and entry into a new market, whether to buy or make a
product and if there is need to engage in promotional activities
(Otley, 2016). In case of the above example, through extensive
scrutiny characterized by the employment of variable costing, it
will be possible to identify and make decisions on whether to
buy or make the beverage product. Moreover, it will be possible
to decide on whether to set up a subsidiary company in the
newly found market and, if need be, engage in promotional
activities (Boyd & Pitre, 2019). Thus, the information provided
is crucial in determining the direction an organization ought to
take to foster customer satisfaction and optimize profits.
Response-2(Mandeep)
A) Profit- cost- volume analysis
Profit cost volume analysis or a break-even analysis identifies
the break-even point where there is no profit or loss. Basically
it identifies the variation in cost & volume that affects business
operating income & net income. Four major factors that are
constituted to know the break-even point are costs, sales

5. volume, Selling price and profit. This analysis helps managers
to make economic decisions like how many units should sell to
break even, how many units a business should sell in order to
gain certain profits, decisions to spend more on machinery or
man power, deciding whether to spend more on advertising in
order to improve overall product sales. Before doing this
analysis manager should make few assumptions like unit
selling-price should be stable/constant, overall costs should be
able to divide into variable and fixed costs and constant, all the
units produced should be sold, if the company deals with more
than one product they should be sold in same-mix. There are
two approaches that can be used to calculate break-even point is
“contribution-margin” and “contribution-ratio” (Atkinson &
Matsamura, 2012).
Contribution margin reflects the profit of the company before
deducting fixed costs in other words it is unit selling price
minus variable cost per unit. Contribution margin represents the
percentage of sales that covers fixed costs. For example if a
business sells a product which has exponential margin that
means it is making enough revenue to cover fixed costs such as
leasing amount, insurance amount. It will also identify if a
product is not making enough margins to cover its variable
costs such has wages for man power and equipment repair costs.
Contribution margin clearly displays the overall percentage for
each unit sold that covers variable-costs and profits. Hence a
business always considers a minimum-price at which product
unit can be sold which covers "Basic" and "Fixed" expenses.
(Abdel & Luther, 2006).
B) Importance of Profit- cost- volume analysis
As a manager, profit cost volume is important to know how
many units should be sold in order to gain certain amount of
margin. Here as a manager I will use contribution margin to
identify the breakeven point of sales. For example business has

6. a 300,000 fixed costs and contribution margin of 20% should
earn a total revenue of 1,500,000 to break even.
CVP = Fixed costs /contribution margin = (Sales-variable costs)
Therefore if a company sells 1500000 units it will break even
and profit will be zero it covers only cost of the production.
Based on this information I will calculate the number of units to
be sold to make enough margins.
C) Variable costing
Variable cost reflects the overall company’s expense that varies
with the number of units produced. Variable costs growth and
fall will purely depends on the volume of the production.
Variable costs include raw material, manpower, packaging costs
which are involved in manufacturing a product. Whenever we
look at income statement exponential rise in costs are not
worries some because when sales rise more number of unites
must be produced first that means variable costs should
increase. In other words if a business wants to increase the
revenues it should consider that expenses will also rise. At all
times revenues should exponentially grow faster than expenses
for example if a business volume growth is 10% and the number
of goods sold is only 2% then overall costs are reduced per unit.
Whenever a business identifies how to reduce its production
costs to produce each item it will be easy to improve the profits
(Hasan, 2015).
Variable costs are considered in project profits and to calculate
cost profit (break-even) point. Also many cost elements have
both variable and fixed costs associates for example company
workforce salaries will not vary with the number of units
produced but whenever production goes down then attrition rate
may increase this clearly explains all the costs involved in
production may vary at any point of time. The business which

7. has more number of variable costs will reflect more consistency
per each unit production cost and will have more chances to
identify profits/margins. When a company markets its product it
is important to divide costs between variable & fixed. This
helps in forecasting the margins improved with varying changes
in each unit sales. Variable costs are influenced by many
elements such as discount rate, project duration, level of
uncertainty and fixed costs (Agrawal & Mehra, 1998).
D) Importance of Variable costing
As a manager it is vital to calculate the variable costing because
it helps to determine how many number of units to produced and
it is important management tool to calculate the total costs.
Total Variable cost = Total Number of units produced x
Variable cost per each unit
Lead glass (raw material) costs = $300,000
Manpower cost = $150,000
Equipment = $100,000
Insurance premiums = $50,000
Machinery = $100,000
Utilities (fixed overhead) = $40,000
Utilities (variable overhead) = $150,000
Number glass jars produced = 2,000,000
Variable costing formula= (Raw material + Labor cost +

8. Utilities (variable overhead)) ÷ Number of glass jars produced
Variable cost formula= ($300,000 + $150,000 + $150,000) ÷
2,000,000
Variable costing = $0.30 per glass jar
Per unit price = $350,000 / 1,000,000 = $0.35 per glass jar
Response-3(Vamsee)
A. Profit-Cost-Volume relationship
In Cost-volume-profit analysis is a strategy for cost
bookkeeping that takes a gander at the effect that changing
dimensions of costs and volume have on working the impact of
three factors on one variable called the Profit. Cost-volume-
profit analysis evaluates the changes in an organization's costs,
both fixed and variable costs, deals volume, and value,
influence an organization's profit. This is an integral asset in
administrative fund and bookkeeping. It is a standout amongst
the most broadly utilized devices in administrative bookkeeping
to enable administrators to settle on better choices (Garrison,
Noreen, & Brewer, 2018).
Here is a well ordered strategy we can utilize to do cost-
volume-profit analysis:
Commitment Margin and Cost-Volume-Profit Analysis: To start
with, investigate the commitment edge salary articulation. The
commitment edge is the distinction between an organization's

9. deals and its variable costs. Computing the commitment edge
salary proclamation demonstrates the partition of fixed and
variable costs. Essentially expressed, it can fit into this basic
condition:
Working Income = Sales - Total Variable Costs - Total Fixed
Costs
So to the better of your understanding, this essential condition
can be extended:
Working Income = (Price x Number of Units Sold) - (Variable
Cost per Unit X Number of Units Sold) - Total Fixed Costs
In analyzing Cost-volume-profit, a ground-breaking capacity is
to figure the break-even point in units for the organization. We
can figure the break-even point in dollars by duplicating the
business cost for item by the break in units.
Break-even point in units is the quantity of units the firm needs
to create and offer so as to make a profit of zero. As it were, it
is the quantity of units where all out income is equivalent to add
up to costs (Garrison, Noreen, & Brewer, 2018).
On the off chance that working pay squares with zero, at that
point the break-even point in units has been come to. On the off
chance that the working pay is sure, the business firm makes a
profit. On the off chance that the working pay is negative, the
firm assumes a misfortune. In the event that you are attentive,
we can see that the factors in this condition take after the
factors you have effectively utilized in the cost-volume-profit
condition. ##One of the focal points of Cost-volume-profit
analysis is break even analysis. In particular, Cost-volume-
profit analysis enables directors of organization to dissect what
it will take in deals for their firm to equal the initial investment.
There are numerous issues included; explicitly, what number of

10. units do they need to pitch to earn back the original investment,
the effect of a change in fixed costs on the break-even point,
and the effect of an expansion in cost on firm profit. Cost-
volume-profit analysis demonstrates how incomes, costs, and
profits change as deals volume changes (Garrison, Noreen, &
Brewer, 2018).
B. Profit-cost-volume important in planning:
The commitment margin is utilized in the assurance of break-
even the original investment purpose of offers. By isolating the
complete fixed costs by the commitment edge proportion, break-
even the original investment purpose of offers as far as absolute
dollars might be determined. For instance, an organization with
$100,000 of fixed costs and a commitment margin of 40% must
procure income of $250,000 to make back the initial investment.
Profit might be added to the fixed costs to perform Cost-
volume-profit analysis on an ideal result. For instance, if the
past organization wanted a bookkeeping profit of $50,000, the
all-out deals income is found by partitioning $150,000 the
whole of fixed costs and wanted profit by the commitment edge
of 40%. This model yields a required deals income of $375,000.
Cost-volume-profit analysis is just dependable if costs are fixed
inside a predefined creation level. All units created are thought
to be sold, and every fixed cost must be steady in a Cost-
volume-profit analysis. Another supposition is all adjustments
in costs happen on account of changes in movement level. Semi-
variable costs must be part between cost orders utilizing the
high-low technique, dissipate plot or measurable relapse (Lulaj
& Iseni, 2018).
C. Variable Costing:
Variable costing is an idea utilized in administrative and
accounting in which the fixed assembling overhead is avoided

11. from the item cost of generation. The strategy is conversely
with retention costing, in which the fixed assembling overhead
is designated to items delivered. In accounting systems, variable
costing isn't permitted in money related revealing.
Variable Costing in Financial Reporting
In spite of the fact that accounting structures, disallow the
utilization of variable costing in budgetary announcing, this
costing technique is regularly utilized by administrators to:
Direct equal the initial investment examination to decide the
quantity of units should have been sold to start procuring a
benefit. Decide the commitment margin on an item, which
comprehends the connection between cost, volume, and benefit.
Encourage basic leadership by barring fixed assembling
overhead costs, which can make issues because of how fixed
expenses are dispensed to every item. Under variable costing,
the accompanying expenses go into the item: Direct material,
direct work, Variable assembling overhead. As per the
accounting gauges for outside financial related detailing, the
expense of stock must incorporate all costs used to set up the
stock for its planned use. It pursues the basic rules in
accounting the coordinating standard. Retention costing better
maintains the coordinating guideline, which expects costs to be
accounted for in a similar period as the income created by the
costs (Lulaj & Iseni, 2018).
Variable costing ineffectively maintains the coordinating rule,
as related costs are not perceived in a similar period as related
income. In our model above, under variable costing, we would
cost all fixed assembling overhead in the period happened.
Notwithstanding, if the organization neglects to sell all the
stock made in that year, there would be poor coordinating
among incomes and costs on the salary explanation.
Accordingly, factor costing isn't allowed for outer detailing. It

12. is generally utilized in administrative accounting and for
interior basic leadership purposes (Lulaj & Iseni, 2018).
D. Variable Costing in managerial decisions:
At the point when managers use Cost-volume-profit analysis to
settle on business choices, the accompanying suppositions are
made:
All costs, including producing, managerial, and overhead costs,
can be precisely distinguished as either fixed or variable.
· The selling cost per unit is steady.
· Changes in action are the main factors that influence
costs.
· All units delivered are sold.
· Commitment margin
Cost-volume-profit analysis can help organizations decide their
commitment margin, which is the sum staying from deals
income after every single variable cost have been deducted. The
sum that remaining parts is first used to take care of fixed costs,
and the straggling leftovers thereafter are viewed as profit
(Reinstein & Bayou, 1997).
On the off chance that an organization has $500,000 in deals
income with variable costs totaling $300,000, at that point its
commitment edge is $200,000. On the off chance that that
organization sells 50,000 units in every year, at that point the
business cost per unit is $10 and the complete variable cost per
unit is $6, leaving a commitment edge of $4 per unit. The
commitment edge can help organizations decide if they have to
lessen their variable costs for a given item or increment the cost

13. per unit to be increasingly profitable (Reinstein & Bayou,
1997).