Question

How apple would use a cost-volume-profit analysis for one of its products. No calculations are necessary; just provide an explanation of how the process works. This section of the paper should be one to two pages. with sources

Answer 1

Cost volume profit analysis is nothing but just tan another formula to derive the Break even point of Sales value (at different Sales and cost price) which atleast should be acheived in order to recover organisation's Variable cost and fixed cost . This formula assumes that the relation between the Sales price and cost price is constabt (i.e. % with which the sales prices will change, cost price will change with same % as well).

The formula of CVP = Fixed cost / Contribution margin

Formula of COntribution Margin = Contribution /Total sales      

Formula of Contribution = Sales - Variable cost

Let us understand it through an example - Suppose the Sales value is $100000, cost price is 50% of sales value and there is fixed cost of $30000. The following will be the Income statement :

Here the contribution is $50,000

and Contribution margin = 50,000/100000 = 50%

Now if managers want to derive the Break even sales value where there will no profit or loss, i.e. least sales value which should be acheived in order to sustain.

Break even sales volume or CVP = Fixed cost/Contribution margin

CVP = 30000/50% = 60000

i..e the company will need to generate atleast $60000 of sales to recover all the variable and fixed cost.

Refer the below table for better clarificaiton: