Report on Cost-Volume-Profit Analysis for Managerial Decisions

This report delves into cost volume profit (CVP) analysis, a vital tool for managers in understanding the relationship between costs, volume, and profit. It examines a business case where a failure to increase production volume resulted in a net loss, highlighting how increased unit sales could have mitigated the loss. The CVP analysis chart illustrates that as the number of units sold increases, the total and variable costs per unit decrease, leading to higher net profits. The report concludes that a proper understanding and application of CVP analysis is crucial for businesses to avoid losses due to inadequate volume planning. Desklib offers a wealth of similar solved assignments and past papers for students seeking to deepen their understanding of managerial accounting concepts.

Running head: ACCOUNTING FOR MANAGERS
Accounting for managers
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ACCOUNTING FOR MANAGERS
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Conclusion:................................................................................................................................3

ACCOUNTING FOR MANAGERS
Introduction:
Cost volume profit analysis is the tool available to the managers of organization for
identifying the relationship between the cost functions and revenue of product along with
evaluating the financial implications for a wide range of operational and strategic decisions.
Profit, cost and volume are the three elements of the cost volume analysis and the failure of
business to appropriately account for all such elements results in incurring loss (Said, 2016).
Discussion:
The business case depicts that the failure of business to increase the total volume of
production results in occurrence of loss. Had the business produced increased level of units,
the amount of net loss generated would have reduced.
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Cost Volume Profit Analysis
Total Sales Total Variable Cost Total Fixed Cost
Tota Cost Net Profit/(Loss)
Cost volume profit analysis of business case:
(Source: created by author)

ACCOUNTING FOR MANAGERS
The chart presented above depicts the cost volume profit analysis of the business
which shows that if the total number of units sold increases, then the total cost incurred in the
production of such unit decreases (Edwards, 2016). In addition to this, the variable cost of
production also decreases. This increased level of units sold would reduce the net loss
generated and increase the net profit amount reported.
Conclusion:
From the analysis of the above situation, it can be concluded that the business fails
because of the component or element of the cost volume profit analysis. If the business is not
able to adequately analyze the situation and how much of the products volume should be
produced, then there can be failure of business due to the loss generated. This loss is
attributable to the total value of sales being less than the total cost incurred.

ACCOUNTING FOR MANAGERS
References list:
Edwards, J. B. (2016). Modern Gross Profit Analysis. Journal of Corporate Accounting &
Finance, 27(4), 45-55.
Said, H. A. (2016). Using Different Probability Distributions for Managerial Accounting
Technique: The Cost-Volume-Profit Analysis. Journal of Business and
Accounting, 9(1), 3.