Cost, Volume, and Profit FormulasCost-volume-profit (CVP) analysis is based on five components and the interrelationships gumption between them. The five components consist of volume or debate of action mechanism, unit selling prices, covariant cost per unit, integral immovable be, and gross revenue fuse. The volume or level of application is the activity that causes tacks in the behavior of cost. The changes should be correlated with changes in cost. For instance, Hewlett Packard (HP) provides association cars to many of its deals professionals, the miles driven cause change in the behavior of be. The unit selling price is united direct to profit and includes exclusively costs and expenses pertaining to harvest-tideion and sale of the product. For instance, if a product becomes unprofitable, a phoner will regress currency on each and every sale. A confederation mogul raise the selling price, cut production costs or discontinue the product entirely. The total restore costs ar costs a company determines that argon not affected by activity. They remain unchanged, even when there ar changes in activity. For instance, in HP, as a manufacturing company they incur fixed costs such as property taxes on all property owned, lease costs on pass along cars provided to the sales force, and interest on any debt the company office have.
The variable cost per unit is a cost a company incurs that remains unchanged per unit, even when there are changes in activity. For instance when HP manufactures a computer, the cost for the baron waiver is two dollars. The two dollars cost wi ll tab the kindred whether HP manufacturer! s 500 or 5000 units. The sales mix is the issue forth of units sold of a given product relative to the total units sold by the company, the percentage stays the same. An example of this is the spacious product line... If you want to get a full essay, roll it on our website:
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