Introduction
You are the successful small businesses have many options if you have experienced by changing markets, the navigation is required. Cost Volume Profit Analysis (CVPA) is a service effectively and for the product I am responsible for the price you need tools to help you "to the user as answer to question important?", "Or services, how my products are profitable best,?" And "given the current market in which businesses operate in the most appropriate utilization levelMatter? "
Solid, semi-variable and variable costs of Understanding
CVPA a solid, semi-variable and variable costs may need to be determined before. Costs related to the decision itself is very useful tool, but it is the white paper.
The cost of fixed costs that occur regardless of sales volume for your business. They rent, insurance, and such costs can be an annual business license. No sales volumes, rather than the current capacity of at least fourEffects.
Variable costs to sales volume and costs that are directly affected. This is the result of a trip to India as a provider of travel services, including costs and sales commissions for selling products such as.
Semi-variable costs, and now you are making, increase sales, direct costs as variable costs of sales. Auto body shop equipment, semi-variable costs can be an example ofMaintenance costs. At some point, increasing levels of equipment used in the management if it is not consistent with the breakdown began. Therefore, in order to prevent high blood pressure due to equipment failure, business owners extra money to spend on maintenance of equipment is used.
Brakes
CVPA are several advantages to using. First, it's about how a particular product or service unit, or breakeven in dollars will be given a specific sales price shows. Break - the point whereRevenue for all variables, plus one year to cover all fixed costs to the point of sale costs. For example, one year a $ 1,000 fixed costs, unit variable costs were a total of $ 1.00, $ 5.00 for the product, and the 250-unit fixed and variable costs in the amount of dollars to be sold will be priced deal 1.250 .
Likely to notice, but it also, CVPA can not break the show, it can be used in the analysis of price sensitivity. For example, the ability of competitors if the price for the same product$ 2.50, but you $ 3.00 or less can not go, it's probably time to have a few options should be considered: the product suspension, fixed and variable cost savings to find a way you $ 2.50, your competitor's - a square burger round in a positive manner in the use of a hamburger or a product in a manner that distinguishes it as the size of the product price to it, "loss leader" to get the door to customers can be.
Contribution margin
Your business is to determine the contribution marginAdditional benefits of CVPA. Contribution margin for each sale simply the amount of dollars left after all variable costs are covered. It is filled with marketing costs, it is part of the cost can be solved.
The previous period and whether it's positive or negative trends can be compared to determine the total contribution margin, because he knows your glass. In addition, the individual contribution margin analysis, product, product line, service, or you can applyService lines. Contribution margin of a particular product or service to determine whether knowing the other was the best decision, implementation of products or performance of this service. Better understand the contribution margin for the very best for your business, will help in the development of pricing strategies.
The last benefit I need to determine the contribution margin, it is the most profitable products or services, even though sales may represent something that can show thatAnother. 100,000 products with sales of products with the sale of the B has a $ 80K, that is, based on total sales, appears for example, more emphasis on the product, and is attractive. But a quick analysis of contribution margin of product B, the fixed cost of products sold 0.34 cents 0.49 cents of every dollar contributed to shows. Clearly, the product B is the actual provider of the supplier's product mix will be part.
Operating leverage
In winsUnderstanding of operating leverage, we repeated the master of our virtual garage. Her recent and significant trend in the above results, go to the machine using the add to her all maintenance and service costs will be for sale because it increases .
She is a determined face: She is, or should the additional investment in fixed assets, sales continued on the platform by adding only the current fixed asset?
Without understandingOperating Leverage, a business owner she can help you make the best decisions are valuable information. Operating leverage of the business to generate profits to the extent that the cost is fixed. To sell at the bottom of sales trends - profits for the large loss trends and the level of fixed costs, greater faith, a big increase.
Always invest in fixed assets, expenses, equipment, funding, additional insurance, etc., as fixed toWhen additional equipment is something that we believe the length of time the owner of the auto body shop will want to seriously consider that if she experiences something, she's - Office sales trend. If long-term - she tends to believe that the fact that the long sales, then the addition of her work on the fixed investment assets, it can be done.
CVPA tools of her right to decide what to do in this situation can be used to determine the owner of our auto repair shop is. Even the model for the rest of her usingConsider the contribution margin, the way he or she can sell up to one attempt to take advantage of the sensitivity analysis performed in order to take advantage of the assistance to improve its work modifying her or not.
Outline
CVPA whether the price of its products and services, and any additional investment in capital items can be highlighted products and services can be used to answer the question tool. Although no one magic bullet, CVPA a good tool to haveBusiness analysis to help you bag a good decision you must answer this question.
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