Question

In: Accounting

Is CVP a tool that can only be used for companies that sell a single product?...

Is CVP a tool that can only be used for companies that sell a single product? Support your view.

Solutions

Expert Solution

No, CVP is not a tool that can only be used for companies that sell a sell a single product but it can be apply on multiple products also. It is very difficult for the companies who sells multiple products to apply CVP approach.

CVP analysis is used to determine the profitability of the company. It cut down cost into different parts: variable and fixed cost.

Company who sells multiple products need to maintain the selling price and variable cost equals of all the products. Different products have different selling price per unit and cost per unit. The theory of product mix can apply to obtain the profitability of the company.

1. You need to know about the quantity or volume of different products that company sells which is helpful to determine the ratio of profitability of different product.

2. Then calculate contribution margin of different products and apply weighted average contribution margin which helps the company to reach the desired profit.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

The basic assumptions is that the company has only one product. How can we use CVP...
The basic assumptions is that the company has only one product. How can we use CVP analysis for a multi-product company? Another basic assumption is that all costs can be classified as either fixed or variable. How can we adapt CVP analysis for situations that have step fixed or curve-linear variable costs?
Tom, the only steel drum manufacturer in Narnia, can sell a single drum for $30. However,...
Tom, the only steel drum manufacturer in Narnia, can sell a single drum for $30. However, for every extra drum he wants to sell, he is forced to reduce the price (for all his customers) by $2. The total fixed costs in his workshop are $15, and the variable cost of the first drum produced is $25. For each extra drum thereafter, the cost drops by $5 up to, and including, the fifth drum. After that, the cost of each...
Is it ethical for tobacco companies to sell a product that is known to be addictive...
Is it ethical for tobacco companies to sell a product that is known to be addictive and a danger to the health of the user? Is it relevant that the product is legal? • Should boards of directors consider only price when faced with a buyout offer? • Is it ethical to concentrate only on shareholder wealth, or should stakeholders as a whole be considered? • Should firms be penalized for attempting to improve returns by stifling competition (e.g., Microsoft)?
Is it ethical for tobacco companies to sell a product that is known to be addictive...
Is it ethical for tobacco companies to sell a product that is known to be addictive and a danger to the health of the user? Is it relevant that the product is legal? What are your thoughts on the sale of marijuana, both for medicinal and recreational purposes? Should firms be allowed to use this product for revenue?
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis...
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis is used, or could be used, at your current place of employment. If you have not worked for a company that might use CVP Analysis, you may choose a well-known company and describe how you envision that company using CVP Analysis. Try to discuss a concept associated with CVP not already addressed by your classmates. Consider using an article to summarize or apply the...
How can CVP techniques be used in supporting a company’s sustainability efforts? Conversely, how might CVP...
How can CVP techniques be used in supporting a company’s sustainability efforts? Conversely, how might CVP be a barrier to sustainability efforts?
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis...
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis is used, or could be used, at your current place of employment. If you have not worked for a company that might use CVP Analysis, you may choose a well-known company and describe how you envision that company using CVP Analysis. Try to discuss a concept associated with CVP not already addressed by your classmates. Consider using an article to summarize or apply the...
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis...
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis is used, or could be used, at your current place of employment. If you have not worked for a company that might use CVP Analysis, you may choose a well-known company and describe how you envision that company using CVP Analysis.
When you're figuring the CVP in a single product setting then do you use the total...
When you're figuring the CVP in a single product setting then do you use the total sales for all years or just one year and if it doesn't tell you then how do you know
How can information be used as a tool for or against governments?
How can information be used as a tool for or against governments?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT