• Prepare to discuss Breakeven Analysis. Include the following steps in the process:
  • Calculation of Unit Contribution Margin and the Contribution Margin Ratio are building blocks to enable the manager to determine breakeven points as well as to allow the setting of target profit volumes.
  • Use of Cost-Volume-Profit Analysis (C-V- P) allows the manager to measure the potential impact of changing business conditions. In addition, C-V-P is necessary to find breakeven and target volumes for multiproduct companies, which are the great majority in the USA.
  • The final benefit of utilizing C-V-P enables management to determine the critical margin of safety, effective operating leverage and the most profitable overhead cost structure for production in sales mix, ability to deal with mixed costs classifications and inventory fluctuations.