Question
Cost-volume-profit analysis (CPV) can be used by management to better understand the relationships between the companys costs, sales volume, and profit. Cost-volume-profit analysis can be
Cost-volume-profit analysis (CPV) can be used by management to better understand the relationships between the companys costs, sales volume, and profit. Cost-volume-profit analysis can be used to evaluate the effects on profit when companies make changes in selling prices, service fees, costs, income-tax rates, and the organizations mix of products or services. CVP analysis provides management with a comprehensive overview of the effects on revenue and costs, allowing them to implement financial changes and track outcomes. Managers in nonprofit organizations, such as health care, can use CVP analysis to examine the effects of activity and other short-run changes on revenue and costs (Hilton, 2016). My health care organization consists of 15 hospitals and we used CPV analysis to examines the costs of cardiac catheterization. Through this process we were able to determine the costs of each unit performing both diagnostic and interventional cases. We found that the larger facilities with higher volume of cases were able to perform procedures at lower costs. When breaking each procedure down to review costs and revenue; we found that we had discrepancies in billing resulting in lost revenue and that expensive product sitting on shelves was expiring at smaller sites before it could be used. Using CPV helped us identify these opportunities, we were able to reduce costs and increase revenues as a system. We were able to standardize billing processes with the help of our coding department. Supplies are now tracked on a system level allowing for sharing of supplies between facilities in order to avoid expiration and waste of expensive supplies. Thoughts?
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