Profit-Cost-Volume Analysis Mathematics & Economics Research Paper (Research Paper Sample)

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Profit-Cost-Volume Analysis
Question A
Profit- cost volume relationship is an analysis that studies the cost accounting that looks at the effect of volume and levels of costs on effective profit. The approach helps in determining the break-even point for several cost structures and sales volumes that may be beneficial for management to make short-term economic decisions. Profit cost volume analysis entails that the entire organization’s costs, comprising administrative costs, retailing costs, and manufacturing costs, be identified as fixed or variable. When using profit cost-volume analysis, key calculations are the contribution margin ratio and contribution ratio. The contribution margin is subtraction between variable costs and sales revenue. I.e. sales revenue – variable costs. It can be calculated on a per-unit basis or using dollars (Cafferky, Michael, Jon, 90).