Using the Internet, review at least 3 articles on Profit-Cost-Volume relationship.As a manager, why is Profit-cost-volume important in planning?

Managers use profit-cost-volume analysis (PCV), to determine the relation between profit, production cost and quantity. This tool is useful for decision-making and planning, because it helps managers understand the impact of changes on other variables.

A single article talks about how PCV analysis can help to find the ideal level of production in a company. The author points out that while increasing production may lead to greater profits, it is only possible to increase them beyond a point. The cost of producing more units becomes prohibitive, and the profit margin begins to decrease. You can calculate the break-even level using PCV analysis.

An article on PCV analysis is also available. The author notes that a company’s profit is determined by the difference between its revenue and cost. Managers can utilize PCV analysis to find the best price for their product by understanding the relationships between them. If a company is looking to maximise its profits, they might choose to price their product higher if the cost of production is low.

The third article discusses how to use PCV analysis for budgeting. The author notes that a budget is essentially a projection of a company’s future financial performance. Managers can create better budget projections by using PCV analysis. This allows them to understand the relationships between cost and profit. A company might use PCV analysis to determine the effects of increasing its production on profit and costs.

  1. For a variety of reasons, profit-cost-volume analysis (PCV), is essential in planning. The first and most important reason is that it helps managers understand the relationships between profit and cost. PCV analysis is a tool that allows managers to improve their company’s profit. It can also be used by them to establish the ideal price or production level.

PCV analysis is a way to plan. One method of using PCV analysis in planning is the determination of the break-even level for a company. The break-even point is the level of production at which a company’s revenue equals its cost, and beyond which the company begins to earn a profit. Managers can understand the break-even point and use it to determine what production level is necessary to break even.

Consider a company with a fixed monthly cost of $10,000 and variable costs of $5 for each unit. A company is selling its product at $10 per unit. The manager calculates the break-even point using PCV analysis.

Break-even point = Fixed cost / (Selling price – Variable cost)

Break-even point = $10,000 / ($10 – $5)

Break-even point = 2000 units

To break even, the company has to produce at least 2000 units each month. A company that produces or sells over 2,000 units per month will make a profit.

  1. Variable pricing is a cost accounting method that does not include variable costs. Variable costs include those that change with production levels, like the labor and raw material cost. On the other side, fixed costs are the ones that don’t change with production levels, like rent or salaries.

The benefits of variable costing when making decisions is the subject of one article. Variable costing may provide more benefits, according to the author.

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