Cost Volume Profit Analysis Model
Abdullahi (2015) describes cost volume profit analysis as an estimate of how changes in costs (Both variable and Fixed) sales volume, and price effect the company‟s profit.
Adenji (2008) states that cost-volume-profit analysis are predetermined costs, target costs or carefully pre planned costs which management endeavors to achieve with a view to establishing or attaining maximum efficiency in the production process
According to HIM, cost-volume-profit analysis is cost plans relating to a single cost unit. Because cost-volume profit analysis purports to be what cost should be, any deviation represents a measure of performance. The predetermined costs are known as cost-volume-profit analysis and the difference between the cost-volume-profit
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• Selling price is constant. • All cost can be divided in to their fixed and variable element. • Total fixed cost remains constant. • Total variable cost is proportional to volume. • Volume is the only drive of cost. • Prices of production inputs (eg materials) are constant. Other areas of application of the breakeven model (C-V-P).exist and these include equipment selection, make – or- buy decision, advertising programmes, choice of channels of distribution, and plant additions. These decisions are the essence of planning and …show more content…
Taking into account the specifics of the hotel product we cannot but accept as logical the results on the extent and frequency of application of CVP analysis. Consequently, Nabil, Osama, &Zaid (2014) while looking at the effect of using break-even-point in planning, controlling, and decision making in the industrial Jordanian companies concluded that, the most of the Jordanian industrial companies are using break-even point in the planning, controlling and decision-making, there is a statistical significant relationship between the use of the break-even point and successful planning, control and decision-making in the Jordanian industrial companies. Corroborating the study by Ndaliman and Bala (2007), Onwuka (2009) suggests a thorough application of breakeven analysis to improve profit levels of small manufacturing firms. She (Onwuka) further states that the mathematical involvement was little, while the advantage was enormous. Most managers are too afraid of figures; they would find this method a safe-
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