ACC 5301 journal 3

Cost-volume-profit analysis is the way how costs and profit change when volume changes. It is a method of cost accounting that identifies the change or state of costs and volume of operating profit. A cost-volume-profit analysis is an evaluation method that looks at the relationship between the level of activity within the organization, the costs within the organization, and the profit of the organization (Jiambalvo, 2020). As a manager, the cost volume profit analysis can be used effectively to determine the selling price of goods and serves as a method used to detect how changes in variable costs affect an organizational profit. It is a cost accounting technique that can be used to make strategic business decisions and used to predict the future when changes occur. Cost volume profit analysis enhances in making several assumptions such as sales price, fixed, and variable costs per unit are stable. Cost volume profit analysis can be used to determine how variables and fixed costs affect an organization's profit margin. Cost volume profit analysis can also be used to determine how many units of product need to be sold to break even (cover all costs) or reach the targeted profit margin. It is a method that can be used to investigate the relationship between the costs in a company, the activity amount in a company, and the profit of the company. A variable cost is a recurring cost that changes in value according to the rise and fall of revenue and output level. An increase in sales will cause an increase in the number of materials and labor.If there is a decrease in sales, materials, and labor needed will decreases as well.As a manager, I will use the calculation outcome to determine the components that can be sold to break even or meet the targeted profit.There are a series of claims made in the risk reward study, such as whether the purchase price, overhead expenses, and contribution margin are stable.