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The paper explains cost-volume-profit (CVP) analysis as a method by which a firm can break down its production and profit figures to determine the optimal levels of production/sales for its products, with the goal of realizing the business' potential profit. The paper highlights the benefits of CVP analysis as well as its potential problems. The writer of this paper relates how CVP analysis would help his friend to effectively manage his resources.
From the Paper:"There are several differences between financial reporting and managerial accounting. At the most basic, the two types of reporting are used to meet the needs of two different groups of stakeholders. Financial reporting is typically geared towards external users. In the case of my friend's business, this is the government's taxation arm. In a public company, shareholders, potential investors and regulators would also be included on the list of stakeholders for which financial reports are created. Financial reporting, therefore, is based around a consistent set of standards (the generally accepted accounting principles) and is conducted solely using the accrual accounting method. This consistency helps external parties measure the firm's outputs."
Sample of Sources Used:
- Williams, Jan R.; Haka, Susan B.; Bettner, Mark S. & Meigs, Robert F. (2002). Financial and Managerial Accounting: The Basis for Business Decisions. McGraw-Hill, New York, 2002.
- Horngren, Datar & Foster. (2003). Cost Accounting. Prentice-Hall, Upper Saddle River, NJ, 2003.
- Williamson, Duncan. (2000). Cost Volume Profit Analysis: Its Assumptions and their Pitfalls. Duncan Williamson. Retrieved February 19, 2009 from http://business.fortunecity.com/discount/29/cvpass.htm
Cite this Term Paper:
Cost-Volume-Profit (CVP) Analysis (2010, December 07) Retrieved October 16, 2021, from https://www.academon.com/term-paper/cost-volume-profit-cvp-analysis-145923/
"Cost-Volume-Profit (CVP) Analysis" 07 December 2010. Web. 16 October. 2021. <https://www.academon.com/term-paper/cost-volume-profit-cvp-analysis-145923/>