Question

Choose a peer-reviewed article on the topic of Cost Volume Profit or Variable Costing. Create a summary of this article and critically analyze the author’s position.

Answer 1

Cost volume profit as it has been reviewed according to the the article on the topic of cost volume profit has led to various inferences drawn from that article-

A. Cost volume profit has various assumptions related to the fixed price and sales price of the company because they believe that the sales price as well as the fixed price of the company is constant in nature and they are not gonna change but the reality is that fixed price of the company is fixed but sales price is changing always.

B. Cost volume profit analysis is always focused at looking at the total cost and total volume in order to analyse the total profit of the company and a change in volume can lead to how much change in the profits.

C. This is a very good analytical tool in order to ascertain a change in the cost in order to impact the change in the profits.

D. Assumptions related to the variable cost that it is always constant in nature is not true in this regard also.

E. Cost volume profit analysis can be used by the company if it has a flexible mindset, and it has a flexible budget in order to amend its projection.