Explain how full-absorption costing can be abused by management to misstate financial results.
Explain how CVP analysis may be helpful in evaluating whether it will be smart to buy a new machine that would reduce labor costs by 60%.
Given the various CVP methods do you agree with the following statement? Why or why not? “CVP analysis is both simple and simplistic. If you want realistic analysis to underpin your decisions, look beyond CVP analysis.”
As we begin week 4 and you read about CVP what are the assumptions that underlie CVP analysis?
It is important for companies to know what their variable and fixed costs are. It is also important for management accountants and production managers to understand the relationship between activity levels and fixed and variable costs. What are some examples of a company’s fixed and variable costs? Should a company’s activity level decrease, what will happen to total fixed costs? What will happen to total variable costs?
Two terms associated with types CVP analysis are fixed and variable costs. Keeping these terms in mind, do you agree with the following? Please explain your thoughts. “All costs are either fixed or variable. The only difficulty in cost analysis is determining which of the two categories each cost belongs to.”