Perform Cost Volume Profit Analysis
Explanation
Use this function to perform a break even analysis. You can choose whether you want to
receive the break even price, or break even volume. You can also calculate
the safety volume, return of sales (ROS), and return on investment (ROI). You can also
replace the Variable Cost with a Base Cost Factor that will reduce or increase the
Variable Cost by the required ratio. A sensitivity study of price change effects is
available in a sensitivity graph. Further evaluation regarding Price Elasticity is also
available.
Prerequisites
- The cost calculation must have been performed for the inventory part you want to study.
- If you want to study an Optimal Price Calculation, you must have performed the Price
Elasticity Estimation.
System Effects
Window
Cost Volume Profit Analysis
Price Elasticity Estimation
Related Window Descriptions
Cost Volume Profit Analysis
Cost Volume Profit
Analysis/Break-Even Analysis
Cost Volume Profit Analysis/Sensitivity
Analysis
Cost Volume Profit Analysis/Optimal Price
Calculation
Price Elasticity Estimation
Procedure
In Cost Volume Profit Analysis window:
- Select the part for which you want to perform the break even
analysis.
- Click the
Break-Even Analysis tab.
- In the Analysis Base list box, select the base of the analysis.
- In the Analysis Type list box, select analysis type; Price, Volume, or Return On Sales.
- If you have selected Price as the analysis type, enter a price per unit in the
Unit
Price field, or if you have selected Volume, enter a volume in the
Unit Volume
field. If you have selected ROS as analysis type, enter a Return On Sales percentage in
the ROS(%) field.
- In the Fixed Cost field, you can choose to specify a fixed cost.
- In the ROI field, you can choose to specify a Return On Investment percentage.
- In the Safety Margin field, you can choose to specify a safety margin percentage.
- In the Base Cost Factor field, you can choose to specify a base cost
factor percentage. This factor will be multiplied by the analysis base cost.
- Click Calculate.
- You can now study the result in the graph and corresponding fields that show the break
even unit price, volume, sales point, safety volume, ROS, ROI volume, and ROI price.
- Proceed with the
Sensitivity
Analysis tab, where you can
evaluate required volume at a price increase of 10% or 20%, or a price decrease of 10% or
20%. The required change in volume is related to the level of Variable Cost of Break-Even
Price.
- Proceed with the
Optimal
Price Calculation tab, where you can
evaluate optimal price and volume given the price elasticity estimation.