Chapter 3 discusses the concepts of contribution margin, cost-volume-profit analysis, and break-even analysis. Discuss how a...
Chapter 3 discusses the concepts of contribution margin, cost-volume-profit analysis, and break-even analysis. Discuss how a manager might use one of these tools to make informed decisions. As an alternative discussion point, how could you use one of these analysis tools in your personal life?
Homework Answers
Let us take break-even analysis as the topic since it would give us a space to work out the areas which we want to cover and will give us detailed know-how on how these analyses would play the role in the management as well as personal lie
Break-even analysis is the point at which sales value or total revenue is equal to total cost or expenditure
The point to be explained is how a manager might use this analysis to make an informed decision
A manager can understand how much sales or production is to be made so that the company will not suffer a loss and he may with respect to this analysis calculate the least production to be made in a month a day and in a year to let the company survive in the market without losing any money
This financial calculation allows you to find the number of products or services you need to sell to at least cover your costs.
Performing a break-even calculation can give you a general sense of whether the idea is worth pursuing. This allows the manager to make key decisions of letting go of the said proposal or is it worth pursuing.
Getting to the next discussion, what is the use of these tools in personal life
in the personal life again using break-even analysis as the base we can understand that a companies income and expenses and personal incomes and expenses are pretty much similar moving on
In the personal life, we can identify how much income we shall earn to optimize the level of expenditure and we can have an analysis of how much are our personal expenses and how much should we earn to turn our hands to some loans or other debts which without proper care will make us all into debt traps
the CVP analysis or cost volume profit analysis lets us have different options and it determines how the volume and cost affects a companies income and in the case of personal life it gives us the idea to cut down the unwanted expenditure to save up more or invest in some other areas and how that would change the income generation of the entity
Let me conclude by saying that these analyses make a manager and or a person whichever case it may be to make key decisions on cost and how to spend the income or how to control the expenditure or how much to spend or how much to earn to survive in the world
these analyses help us to have a detailed analyze on how we are to spend the income
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Chapter 3 discusses the concepts of contribution margin,
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