Cost-volume-profit analysis is an important part of modern cost management. Cost-volume-profit analysis can not only predict the sales volume or sales volume that should be realized under the condition of capital preservation and poly, but also provide methods and means for enterprises to resolve business risks and ensure the realization of the established goals of enterprises. If combined with decision-making, it can help enterprises to make relevant production decisions, pricing decisions and uncertainty analysis of investment projects. In addition, the cost-volume-profit analysis can also be used as the basis for compiling a comprehensive budget and controlling costs. The reason why people study the relationship between cost, quantity and profit is because the traditional cost classification can no longer meet the requirements of enterprise decision-making, planning and control. These internal management work of enterprises usually take quantity as the starting point and profit as the goal. When deciding the quantity of production and sales, enterprise managers are very eager to know its influence on enterprise profits.
Managers need a mathematical model, which should be constant except for business volume and profit, so as to establish a direct functional relationship between business volume and profit. In this way, they can use this model to estimate the impact on profits when the business volume changes, or calculate the business volume level needed to reach the target when the profit target changes. The main obstacle to establishing such a model is that the quantitative relationship between cost and business volume is not clear. Therefore, people first study the relationship between cost and business volume, establish the classification of cost according to its nature, and then clarify the relationship among cost, quantity and profit on this basis. The research on the relationship between cost, quantity and profit is based on the research on the relationship between cost and quantity, which is usually called cost behavior research. The so-called cost behavior refers to the dependence of total cost on business volume. The business volume here refers to the index of the level of production and operation activities of enterprises. There are different types of costs, which can be roughly divided into fixed costs and variable costs. Fixed costs are costs that are not affected by business volume, while variable costs are costs that increase in direct proportion with business volume growth. After dividing the cost into fixed cost and variable cost, plus income and profit, the relationship among cost, sales volume and profit can be unified in a mathematical model.
The basic factors involved in establishing the cost-volume-profit equation include the following five factors, namely, sales price, unit variable cost, production and sales volume, total fixed cost and profit target. According to the relationship between the above factors, the basic equation of cost-volume-profit analysis can be established. Profit target = sales revenue-sales cost = sales revenue-(total variable cost+total fixed cost) The breakeven point refers to the total amount of business that can enable the enterprise to achieve the state of capital preservation. At this level of business volume, the difference between enterprise income and variable cost is the same as fixed cost.
Break-even analysis Break-even critical analysis is a basic content of cost-volume-profit analysis, also known as break-even analysis or break-even analysis. This paper mainly studies how to determine the critical point of profit and loss and the influence of changes in related factors on the critical point of profit and loss. It can also provide information for decision-making under what business volume the enterprise will make a profit and what business volume it will lose.
We will mainly consider the determination of the critical point of profit and loss in the following case analysis. Here we first give the concept of the critical point of profit and loss and some basic formulas. The critical point of profit and loss refers to the operating state that the income and cost of an enterprise are equal, that is, when the marginal contribution is equal to the fixed cost, the enterprise is in a state of neither profit nor loss. This state is usually manifested as a certain amount of business.
Profit = unit price * sales volume-unit variable cost * sales volume-fixed cost, so that the profit is equal to zero, and the sales volume at this time is the break-even point sales volume.
Breakeven point sales = fixed cost/(unit price-unit variable cost) Breakeven point sales = fixed cost/marginal contribution rate
Break-even point activity rate = break-even point sales volume/normal sales volume, indicating the proportion of business volume guaranteed by the enterprise to normal business volume. Because the production and operation capacity of most enterprises is planned according to the normal sales volume, and the production and operation capacity is basically the same as the normal sales volume, the operating rate of the breakeven point also indicates the utilization degree of the production and operation capacity in the state of breakeven.
If the relationship between cost, sales volume and profit is reflected in the rectangular coordinate system, it will become a volume-profit diagram. Because it can clearly show the production and sales volume that an enterprise should achieve when it is unprofitable or losing money, it is also called breakeven chart or breakeven chart. Using charts to express the relationship between cost, quantity and profit is not only intuitive and clear, but also easy to understand.