presents the cost-volume-profit (CVP) analysis model and illustrates how managers use that model to help answer important what-if business questions. CVP analysis also helps management accountants alert managers to the risks and rewards of decisions they are considering by illustrating how the bottom-line is affected by changes in activity levels or key pricing or cost components. CVP analysis is based on several assumptions, one of which is that fixed costs can be distinguished from variable costs. However, whether a cost is variable or fixed depends on the time period for the decision and also the range of activity (relevant range) being considered. Students are also presented with a method for applying CVP analysis to companies with multiple products and to situations where there is more than one cost driver. The applicability of CVP to manufacturers, service organizations, and nonprofits is discussed. Contribution margin is also defined and distinguished from gross margin.

Your business is now full steam ahead. Begin by including the name of your business and discuss how you as a manager would use CVP to address the "what-if" of your business. What are your fixed and variable costs, what are the cost drivers of your various products. How are these cost factors going to impact contribution margin and gross margin...will you have to increase prices, will you be able to lower prices, is it possible to have a buy-one-get-one half off sale to increase sales?