Backyard Bulldog Barbecue Sauces, Inc., founded by Jefe Allen, produces a variety of barbecue sauces for use in outdoor grilling. Jefe is having difficulty understanding the relationship between different types of costs, revenue and profit.

Jefe has asked you to clarify this issue for him by answering the following questions.

1. Define the different types of costs that Backyard Bulldog Barbecue Sauces, Inc. will incur along with several examples of each.

2. How could overly optimistic sales estimates potentially harm Jefe's business?

3. Explain how cost-volume-profit analysis can help Jefe make good managerial decisions regarding Backyard Bulldog Barbecue Sauces, Inc.?