Cost-Volume-Profit Analysis Applications

This assignment delves into the core principles of cost-volume-profit (CVP) analysis. Students are tasked with analyzing various aspects of CVP, including fixed costs, variable costs, contribution per unit, and the break-even point. They will apply these concepts to real-world business scenarios, demonstrating their understanding of how CVP analysis can inform strategic decisions related to pricing, production volume, and profitability.

ACCOUNTING

Table of Contents
Short term decision making of business.............................................................................................................1
CONCLUSION...............................................................................................................................................................4
REFERENCES................................................................................................................................................................5

IFRS structure portrays about basic concept which is related with content of financial statements for extrinsic users. With
assistance of this, leader can provide growth and success to company. Along with this, they can resolve issues which cannot be
addressed by own. Essential purpose of this assignment is to determine characteristics related to financial reporting as well as how
it can be helpful for those people who are using accounts (Zimmerman and Yahya-Zadeh, 2011). Instead of this, there are various
forms of short term judgements which will be useful for firm.
Financial reporting is an effective procedure which helps to create statements, as it will reveal position of an enterprise to
administrative department, financiers, government and other institutions. Fundamental target if this reporting is to provide
information to employer when they are taking decision for company (Conceptual Framework for Financial Reporting 2010, 2017).
Clients want to acquire data with respect to assets of business element, so that they can evaluate an firm's future income era.
The IFRS structure clarifies that wide goals which are connected to financial reports can't be more viable for a customer to
develop an appropriate decision. It incorporates advertise direction, it requests to get helpful data with respect to budgetary report.
Financial statements are much helpful for shareholders of firm who are having qualitative traits ( Romney and Steinbart, 2012).
Several essential attributes are mentioned as beneath:
There are some quantitative characteristic which are associated with financial reporting are discussed as below:
 Relevance: Financial data or information has to be relevant, hence decision can be taken effectively. It is more adequate
rather than which is developed by clients. Both predictive as well as collateral value is interrelated with each other
(Prospective Studies Collaboration, 2012).
 Materiality: This factor is much related to quality of data, so that they can easily manager financial report of company
(MacLure, 2013).
 Faithful representation: Data which is associated with books of accounts have to be completed. In other words, it must be
error free or entire mistakes have to be eliminated (Bolinska, A., 2013).
To improve qualitative traits:
 Comparability: It is essential for manager to compare performance of business with other companies to know their
effectiveness. For above stated purpose, they can use their accounting position. As a result they will know about their
growth as well as development as comparison to their competitors (Schneider and et. al., 2014).
 Verifiability: If employer verify entire data and information related to performance of firm which is collected by them, then
they can easily know its reliability. For this, they can use some appropriate methods, for example they can conduct audit
of their books of accounts (Dechow and et. al. 2011).
If an enterprise wants to improve their qualitative traits then they have to utilize all above factors in business. Moreover, if
it will enhanced then it can create irrelevant data as well as not be much faithful or reliable (Zadek, Evans and Pruzan, 2013).
Short term decision making of business
Employer has to take an adequate decision and for this purpose he or she can utilize available data.
Information can be associated with past records also. Thus, manager can take appropriate judgements which is
beneficial for their company (Brandt, Van Biesebroeck and Zhang, 2012). Short term decisions have to
taken more effectively, as it can affect their daily operations. There are several terms which are related to short term
decision, are stated as beneath:
Contribution per unit: It is accomplished through deducting contribution per unit from variable expenses. As per this, sales
incomes can not be consumed with help of variable cost, thus it is contributed to fixed expenditures. Along with this, company can
easily determine their daily sales of business by calculating this. Additionally, entire cost can also be identified which is occurred
during procedure. Therefore, it will assist organisation to gain revenues from their units (Poulter and et. al., 2014).
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Break even point: If there is total sales is equal to the total expenditure, then there is situation of no profits no loss.
In other words, if an organisation produce actual sum which is related to incomes as expenses at the time of
production procedure or may be financial accounting time period. It is must for manager of firm to know about
entire units which they are going to sell, so that they can gain profits which is similar to total cost (Pathak, Hu and Zhang, 2012).
Along with this, it comprises both kind of cost fixed as well as variable which can be occurred during procedure of manufacturing
(Kim and Van Wee, 2011).
Fixed cost: This sort of value is always fix and never get affected if there is any modifications in units or any other
elements. For example, rent, instalments of loan, insurance premium and so on. Along with this, it can not be
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Illustration 1: Contribution per unit
(Source: Contribution per unit, 2012)
Illustration 2: Break even point
(Source: Break even, 2017)

develop economic of measure for firm. It will change if there is any alterations in sales but never vary during short term (Zhang
and Zhang, 2011).
Variable cost per unit: It is related to association's level of production. It can be fluctuate if there is any increment
or decrement in procedure of manufacturing. It will include some factors, such as direct labour, overheads as well as
material. These all components can directly influence decision of company. As employer is not much able to
determine total expenses which can be occurred by enterprise (Chaney, Faccio and Parsley, 2011).
CONCLUSION
As per above mentioned report it has been concluded that financial reports are most essential factor for
each and every kind of association. In this assignment, there is a description about it in broad manner. Along with
this, it also comprises short term procedure which will assist manager in their decision making process. There are
various methods through which manager of company can take short term decision for their business, it will comprise
fixed cost, variable cost, break even point, contribution per unit and so on. These all elements can affect firm
directly as well as indirectly. Hence, these all have to be considered by employer.
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Illustration 3: Fixed cost
(Source: Fixed cost, 2017)

REFERENCES
Books and Journals:
Bolinska, A. (2013). Epistemic representation, informativeness and the aim of faithful
representation. Synthese. pp.1-16.
Brandt, L., Van Biesebroeck, J. & Zhang, Y. (2012). Creative accounting or creative destruction?
Firm-level productivity growth in Chinese manufacturing. Journal of development
economics. 97(2). 339-351.
Chaney, P. K., Faccio, M. & Parsley, D. (2011). The quality of accounting information in
politically connected firms. Journal of Accounting and Economics. 51(1). 58-76.
Dechow, P. M. & et. al. (2011). Predicting material accounting misstatements. Contemporary
accounting research. 28(1). 17-82.
Kim, N. S. & Van Wee, B. (2011). The relative importance of factors that influence the break-
even distance of intermodal freight transport systems. Journal of Transport Geography.
19(4). 859-875.
MacLure, M. (2013). Researching without representation? Language and materiality in post-
qualitative methodology. International journal of qualitative studies in education.
26(6). pp.658-667.
Pathak, A., Hu, Y. C. & Zhang, M. (2012, April). Where is the energy spent inside my app?: fine
grained energy accounting on smartphones with eprof. In Proceedings of the 7th ACM
european conference on Computer Systems. pp. 29-42. ACM.
Poulter, B. & et. al. (2014). Contribution of semi-arid ecosystems to interannual variability of the
global carbon cycle. Nature. 509(7502). 600.
Prospective Studies Collaboration. (2012). Age-specific relevance of usual blood pressure to
vascular mortality: a meta-analysis of individual data for one million adults in 61
prospective studies. The Lancet. 360(9349). pp.1903-1913.
Romney, M. B. & Steinbart, P. J. (2012). Accounting information systems. Boston: Pearson.
Schneider, J. A. & et. al. (2014). U.S. Patent No. 8,718,367. Washington, DC: U.S. Patent and
Trademark Office.
Zadek, S., Evans, R. & Pruzan, P. (2013). Building corporate accountability: Emerging practice
in social and ethical accounting and auditing. Routledge.
Zhang, J. L. & Zhang, M. Y. (2011). Supplier selection and purchase problem with fixed cost
and constrained order quantities under stochastic demand. International Journal of
Production Economics. 129(1). 1-7.
Zimmerman, J. L. & Yahya-Zadeh, M. (2011). Accounting for decision making and control.
Issues in Accounting Education. 26(1). 258-259.
Online:
Break even. 2017. [Online]. Available through:
<http://www2.owen.vanderbilt.edu/germain.boer/mgt413/cvp/cvp.html>. [Accessed on 14th Sepetember
2017].
Conceptual Framework for Financial Reporting 2010. 2017. [Online]. Available through:
<https://www.iasplus.com/en/standards/other/framework>. [Accessed on 14th September 2017].
Contribution per unit. 2012. [Online]. Available through: <http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki
%20Pages/CVP%20Analysis%20(Single%20product).aspx>. [Accessed on 14th September 2017].
Fixed cost. 2017. [Online]. Available through: <http://accountingexplained.com/managerial/cost-behavior/>.
[Accessed on 14th Sepetember 2017].
Variable cost. 2017. [Online]. Available through: <http://accountingexplained.com/managerial/cost-behavior/>.
[Accessed on 14th Sepetember 2017].
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