Acc 561 Week Five Discussion Questions And Answers

What are the components of cost-volume-profit (CVP) analysis The components of cost-volume-profit (CVP) analysis are fixed cost, variable cost, product mix and volume. Fixed cost are costs that do not vary with the volume of production while variable cost are those cost that vary with every unit of production, the product mix is the ratio at which different units are produced. For example a product mix might be two units of A for every one of B (Horngren, et al, 2005). References Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., Schatzberg, J. (2005). Introduction to management accounting. Upper Saddle River, New Jersey Prentice Hall. How does a CVP income statement help management make decisions A CVP income statement help management make decisions by highlighting only the costs that are relevant to decision making. By presenting only the relevant information CVP income statement allows management to drill down to the variables that are affected by their decision. By comparing only the relationships between the cost of producing goods, the volume of goods sold and the margins generated by the sale of those goods, the management is able to determine the profitability of their products or services (Horngren, et