Gosford Manufacturing produces a single product that sells for $200. Variable costs per unit equal $50. The company expects total fixed costs to be $140 000 for the next month at the projected sales level of 2000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.

One of the first steps to take when using CVP analysis to help make decisions is:

calculation of the degree of operating leverage for the company.

finding out where the total costs line intersects with the total revenues line on a graph.

estimating how many products will have to be sold to make a decent profit.

identifying which costs are variable and which costs are fixed.