Assignment 2: Analyzing Profitability and Other Variables
Cost-volume-profit analysis is an extension of break-even analysis. CVP analysis enables managers to understand cost behavior and the effect on profits in response to a wide variety of influences, such as changes in volume, variable and fixed costs, and price. This helps management make appropriate business decisions. For example, CVP analysis helps management identify a break-even point if volume or costs change or determine the volume necessary for a targeted profit level. CVP analysis can also help management develop a pricing strategy by projecting the effects the different price structures will have on costs and profits.
In this assignment, you will examine how you can use CVP analysis to plan and make various business decisions. In addition, you will analyze financial data of Compnet’s potential product acquisition (Prime Component) and determine the effects on profit due to variations in its costs and sales price.
Part I: Using CVP Analysis for Business Decisions
Respond to the following:
Write your initial response in a minimum of 500 words. Apply APA standards to citation of sources.
By Saturday, January 30, 2016, post your response to the appropriate Discussion Area. Through Monday, February 1, 2016, review and comment on at least two peers’ responses.
Part II: Performing CVP Analysis
Continuing with the same scenario as in previous assignments for Compnet, complete the following:
Create 5–7-page document in Microsoft Word that includes both the memo and the paper.
Review standard office memo templates available on the internet and create the one-page memo in Microsoft Word considering the audience to whom this information needs to be presented.
Apply APA standards to citation of sources.
Use the following file naming convention: LastnameFirstInitial_M4_A2.doc. For example, if your name is John Smith, your document will be named SmithJ_M4_A2.doc.
By Wednesday, February 3, 2016, deliver your assignment to the M4: Assignment 2 Dropbox.
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