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    Reflection Paper

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    Norshyka Shaharuddeen
    This reflection paper discusses cost-volume-profit (CVP) analysis and activity-based costing (ABC). CVP analysis helps companies understand how changes in variable costs, fixed costs, and sales volume affect profits. It also helps identify the break-even point where revenue equals costs. ABC is a costing method that assigns overhead costs to products based on their use of activities, providing more accurate product costs than traditional methods. The paper explains the benefits of both methods in helping companies improve pricing strategies, control overhead costs, and enhance decision making.

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    Reflection Paper

    Uploaded by

    Norshyka Shaharuddeen
    92 views2 pages
    This reflection paper discusses cost-volume-profit (CVP) analysis and activity-based costing (ABC). CVP analysis helps companies understand how changes in variable costs, fixed costs, and sales volume affect profits. It also helps identify the break-even point where revenue equals costs. ABC is a costing method that assigns overhead costs to products based on their use of activities, providing more accurate product costs than traditional methods. The paper explains the benefits of both methods in helping companies improve pricing strategies, control overhead costs, and enhance decision making.

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    This reflection paper discusses cost-volume-profit (CVP) analysis and activity-based costing (ABC). CVP analysis helps companies understand how changes in variable costs, fixed costs, and sales volume affect profits. It also helps identify the break-even point where revenue equals costs. ABC is a costing method that assigns overhead costs to products based on their use of activities, providing more accurate product costs than traditional methods. The paper explains the benefits of both methods in helping companies improve pricing strategies, control overhead costs, and enhance decision making.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    92 views2 pages

    Reflection Paper

    Uploaded by

    Norshyka Shaharuddeen
    This reflection paper discusses cost-volume-profit (CVP) analysis and activity-based costing (ABC). CVP analysis helps companies understand how changes in variable costs, fixed costs, and sales volume affect profits. It also helps identify the break-even point where revenue equals costs. ABC is a costing method that assigns overhead costs to products based on their use of activities, providing more accurate product costs than traditional methods. The paper explains the benefits of both methods in helping companies improve pricing strategies, control overhead costs, and enhance decision making.

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    NORSHYKA BINTI SHAHARUDDEEN

    2022404146
    AA7001CF

    REFLECTION PAPER ON COST-VOLUME-PROFIT ANALYSIS

    Cost-volume-profit (CVP) is a way for companies to determine how the changes


    in both variable and fixed cost and sales volume can affect a company’s profit or net
    income. By have a better understanding on this topic, the companies can have a better
    overall performance on how to maximize the company’s profit. It also can help the
    companies to analyze where they are in terms of cost, how many quantities will they
    have and their profit.
    As I mentioned break-even on my first paragraph, break-even is the number of
    units that the company must produce and sell in order to make the profit equals to
    zero. In a simple word, the number of units produce is where the total revenue is the
    same to the total of expenses. If the profit is equals to zero, the break-even point has
    been reached. This will help the company to not get losses.
    In addition, CVP can be a good start for making a new decision making. It might
    be challenging at first because of many uncertain elements, multiple products and
    demand, if the companies willing to use this analysis, then the companies need to
    figure out the internal and external environment, and the relationship between all the
    variables by themselves.
    CVP also helps in composing the different price policies by showcasing the
    reaction and impact of fluctuating price frames on the cost and profits. The pricing
    factor also plays a vital role in fixing up the volumes in the dejection period as well.
    This particular security and analysis help in apprehending the amount of operating
    expense to be taxed on to the goods at numerous stages of operation. The already
    analyzed overhead cost is associated with the chosen and adopted volume of the
    production.
    In conclusion, CVP can helps the operators and managers to discover and
    locate the break-even point. This method sets up the budgeting activities related to
    business. It is a systematic approach to analyzing any manufacturing business to
    provide a clear picture of the business and assist in making decisions.
    REFLECTION PAPER ON ACTIVITY-BASED COSTING

    Activity-Based costing (ABC) is a costing method that assigns overhead and


    indirect costs to related products and services. This method recognizes the
    relationship between costs, overhead activities and manufactured products, assigning
    indirect costs to products less arbitrarily than traditional costing methods. Plus, this
    method mostly used in the manufacturing industry since it enhanced the reliability of
    cost data, hence the producing nearly true costs and better classifying the costs
    incurred by the company during its production process.
    Since ABC method using a cost driver such as purchase orders or machine
    setups, it will help the companies to have a better grasp on costs so that the companies
    will have a more appropriate pricing strategy.
    All methods have pros and cons. The benefits for ABC method are this method
    brings accuracy and reliability in product cost determination just by focusing on cause
    and effect relationship in cost incurrence. It recognizes that the activities which cause
    costs, not products and it is product which consume activities. As a results, ABC
    provides more realistic product costs in manufacturing environment and technology
    where the support functions overheads constitute a large share of total costs. Unlike
    the traditional method is likely to bring errors and approximation in product cost
    determination because the method is using arbitrary apportionment and absorption
    methods.
    In addition, ABC methods can help the manager to be able to control many
    fixed overhead costs by exercising more control over the activities which have caused
    these fixed overhead costs. This is more visible and clearer since the behavior of many
    fixed overhead costs in relation to activities. Plus, this method uses multiple cost
    drivers which are transaction based rather than product volume.
    ABC method is not only focusing on manufacturing but service organizations
    like banks, government departments and hospitals can improve decision making and
    cost management since these field have almost no direct costs. So, the traditional
    method considered inappropriate to use because for this service organization are
    using most of the costs are overheads and they do not hold stocks of service.
    For the cons, ABC has numerous cost pools and multiple cost drivers and
    therefore it can be more complex than traditional product costing systems. It can prove
    costly to manage ABC system.

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