Part 1:
Why is CVP analysis useful? Why is it an important concept in managerial accounting?
Would the CM approach better assist management in ensuring that all costs will be covered? I think that under absorption costing, FC would become inventoriable and thus buried when production exceeds sales. Conversely, under the CM approach, FC are treated as period costs, and thus it is less likely to overstate profits. What are your thoughts on this topic?
Part 2:
Let's say that a company produces a single product with a sale price of $25 per unit. The variable cost per unit is $15 and the company incurs fixed costs of $50,000 per month. What is the break-even point for this company? How much would we expect in profit for every unit sold above break-even? What if the company has its budget set at $35,000 target profit? How many units must it sell?
Does anyone have first-hand experience in the use of CVP and breakeven at your place of work? Can you share your experiences?