Question

If you were an owner of a McDonalds corporation, what changes would you make in your Cost Profit Volume when deciding to open a new store?

Answer 1

CVP analysis is important because it determined the Pricing strategy and cost , while opening a new store based on the market demads of the products will keep up the price competitive and same time profitable for the company.

CVP analysis will provide the compensation offered to the staffs/Employee based on the operational costs for the product. CVP analysis is very important in determining the response of the company’s staffs to the changes in labour market such as the rise in the minimum wage in its franchises.

The CVP will help the company to differentiate its variable and fixed costs and profit. In order to open a new store, McDonalds will use CVP analysis to determine the levels of operational costs and the expected profits.

Location is also the most important factor which decide the near by competitive brands which is in the industry.

The changes should be minimum fixed cost which will benifited to company and as the volume up basis demand then Gross margin improved and provide positive NEt income for the company.