Cost Volume Profit Analysis

Glossary

I got to maintain the understanding of words that you would know about Cost Volume Profit or “CVP”, so I would be starting to introduce the keywords of the blog, and keep the flow going.

  1. Fixed Cost: That is held constant for a specified period of time.
  2. Sunk Cost: Money that has been spent and permanently lost.
  3. Margin: Difference between the market value of a collateral and amount of the loan advance against it.
  4. Variable Cost: A characteristic, number, or quantity that increases or decreases over time, or takes different values in different situations.
  5. Break Even Point: Point in time (or in number of unit sold) when forecasted revenue exactly equals the estimated total costs; where loss ends and profit begins to accumulate.
  6. Cost of Goods Sold: Alternative term for cost of sales.
  7. Operational Costs: Cost per unit of a product or service, or the annual cost incurred on a continuous process.
  8. Cost Control: the process or activity on controlling costs associated with an activity, process, or company.
  9. Revenue: The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expense are deducted.
  10. United: Definitive or determinate quantity adopted as a standard of measurement and exchange.
  11. Desired: Strongly wish for u want.
  12. Management Accounting: (Economics, Accounting and Finance/ Accounting and Book-keeping) another name for cost accounting.
  13. Cost: The amount that has to be paid or given up in order to get something.
  14. Expenses: Money Spent or cost Incurred in an organization’s efforts to generate revenue, representing the cost of doing business.
  15. Profit: The surplus remaining after total cost is deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise.
  16. Strategy: A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

 Business Costs –

To get an idea of business costs, here are the deeper meanings of the 3 main costs and graphs

Fixed Cost

In my definition it’s a cost that will remains in a constant payment. An example of Fixed cost are, salary, purchase of equipment, rent, Insurance.

Fixed Cost Behavior

Image

If you could see there are two different fixed costs; total fixed costs and Fixed cost per unit.

Total fixed costs is a line that would not change unless, there is a change like a rent, they bring up the rent prize because there’s new update or bring the rent down because its old and rusty.

Fixed Cost per Unit is  a formula  when you get your total fixed cost you divide that by units you sold therefore the line would never go up because its division.

 Variable Cost

Variable cost would be the cost that would not be expected on the business, the level of action would change. For an example of variable cost would be buying fuel, the fuel cost would go up depending on the situation of the search of fuel, so it’s not expected meaning it’s a variable cost.

Image

So as Variable cost it has two different variable cost, a total and per unit.

Total Variable cost is Variable cost per unit multiplied by unit sold, and that’s how you get the variable cost

Variable cost per unit is the same as the equation of fixed cost per unit it is; Total Variable cost divided to units sold.

Mixed Cost

Mixed cost is simple its just a mixture of  variable cost and fixed costs.

 Image

This is an example of  mixed cost can you see its a mixed cost of fix cost which is green and variable cost which is blue.

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