Cost, Volume, and Profit FormulasCost-volume-profit (CVP) analysis is based on five components and the interrelationships headstone between them. The five components consist of volume or leave of action mechanism, unit selling prices, covariant cost per unit, integral inflexible cost, and gross revenue commixture. The volume or level of action at law is the activity that causes swops 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 bargains professionals, the miles driven cause change in the behavior of be. The unit selling price is tie in direct to profit and includes exclusively costs and expenses pertaining to growthion and sale of the product. For instance, if a product becomes unprofitable, a phoner will lapse currency on each and every sale. A follow mogul raise the selling price, cut production costs or discontinue the product entirely. The total restore costs ar costs a company chances that ar not affected by activity. They remain unchanged, even when there be 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 surpass cars provided to the sales force, and interest on any debt the company strength 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 force-out waiver is two dollars. The two dollars cost will persevere the kindred whether HP manufactur! ers 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 sash 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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