If you are a manager, one aspect of decision making is trying to account for change, adjusting how you go about your finances based on your situation. This can be illustrated through contribution margin—an aspect of cost-volume-profit analysis that is useful for both professionals and consumers for decision making.
For example, the best time for a consumer to buy a car is at the end of the year, because the sellers are more willing to sell cars at the lowest of margins to meet their quotas.
Consider how situations such as this are not only normal but also critical to proper decision making based on the conditions of your company and the market.
In a one and half page paper:
- Give an explanation of which features of cost-volume-profit analysis help managers cope with uncertainty. Justify your response.
- Give an explanation of why managers are interested in the break-even analysis point.
- Give an analysis of how the contribution margin changes in relation to output levels due to changes in variable costs and fixed costs. How can managers make changes to variable costs and fixed costs once budgets or production targets have been set?