Uses and limitations of cost data for planning operations

Describe, evaluate and demonstrate the technical skills necessary to problem solve in the areas of product costing; cost behaviour; cost volume profit analysis; budgeting; and performance analysis; and
• Explain the uses and limitations of cost data for planning operations; controlling activities; and decision making.
Group or individual Group
Weighting 20% 1,500 word limit (excluding the title, headings/sub-headings and references)
Due date Due 5pm Monday 13 January 2020

provide a Management accountancy consultancy service that will document research and advice as to how to apply breakeven and Cost-Volume-Profit (CVP) analysis to a selected small business. The summary advice will be in the form of an essay to the small business owner.
Instructions:

  1. What is CVP analysis?
  2. Assumptions, benefits, and drawbacks of CVP analysis?
  3. Formula and other calculations (contribution margin, contribution margin ratio, break-even point).
  4. Identify a local small business. In choosing your business do not use examples provided in class or in any textbook. Note: Assume that you have already had a brief conversation with the owner about breakeven and CVP analysis, and the owner expressed an interest in learning more.
  5. Conduct research to locate websites that provide information about the terms breakeven analysis and cost-volume-profit analysis. Also search for these terms on websites designed explicitly to assist small business owners.
  6. In your essay include the following:
    a. headings and sub-headings to structure the essay.
    b. a brief description of the selected business and a definition of its product(s) or services(s) for the purposes of this breakeven and CPV analysis.
    c. Provide examples of relevant fixed and variable costs and explain how these will be used in breakeven and CVP analysis.
    d. Specify how this business could utilize breakeven and CVP analysis. Why might CVP analysis be more useful to small business owners than to managers of larger entities? For example, consider whether information about the margin of safety and size of potential losses might be especially important for owners of small businesses.

Sample Solution

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