Budgets
Cost–volume–profit analysis: A form of cost accounting analysis that many businesses use to assess financial situations.
Contribution margins: The amount that remains to cover fixed expenses after subtracting variable expenses.
CVP is defined as:
Analysis that deals with how profits and costs change with a change in volume. More specifically, it looks at the effects on profits of changes in such factors as variable costs, fixed costs, selling prices, volume, and mix of products sold. By studying the relationships of costs, sales, and net income, management is better able to cope with many planning decisions. (Cost–Volume–Profit (CVP) Analysis, 2012)
A high contribution margin is better for a company than a low contribution margin. Usually, accountants move and summarize the items of a regular income statement to accommodate the needs of a CVP report, which creates a different view of revenues and expenses.
Cost–Volume–Profit (CVP) Analysis. (2012). AllBusiness.com. Retrieved on October 12, 2012, from www.allbusiness.com/...
