why is this post correct? or why not? 300 words or more

Cost-Volume Profit Analysis (CVP) is also known as the breakeven analysis. It is a way that organizations discover how the change of costs either in the variable or fixed, and sales, will influence the organizations profit (Muchuga, 2012). The purpose of the analysis is to have as a guide the performance in the organization of how many units need to be sold to be able to break even, for the margin safety of the organizations sake. The three important assumptions in cost-volume profit analysis is selling price, variable cost per unit, and total fixed costs (Choo, 2011). According to the corporate finance institute, the main components of the CVP analysis are 1. Cm ratio and variable expense ration, 2. Break even point, 3. Margin of safety, 4. Changes in net income, 5 degree of operating leverage (Tanen 2020).

1. CM Ration and Variable Expense ratio is calculated by:

CM Ratio = contribution margin / sales.

Variable Expense Ratio= total variable costs/ sales.

1. Break even Point is calculated by:

BEP= total fixed costs/ CM per unit (Tanen, 2020).

1. Changes in net income is calculated by:

Number of units (Fixed costs + target profit)/CM Ratio

1. Margin of safety is calculated by:

Margin of Safety = Actual Sales- Break even sales

1. Degree of Operating Leverage (DOL) is calculated by:

DOL= CM / Net Income

By using this information to form a CVP analysis, organizations will be able to create decisions based on research and calculations. The decisions and outcomes are more solid.

An example here is:

CREPE CAKES operates a number of Crepe snack kiosks in malls. The fixed weekly expense of a crepe kiosk is $1,200 and the variable cost per crepe serving is $0.19.

CREPE CAKES	2,500 CREPES/WEEK
Fixed costs	$1,200
Variable costs	475
Total Cost	$1,675
AVG. Cost Per crepe served	0.67

Calculation

100 = 2500

X = 1675

= X= .67