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Our small business accountants in Southbank explain what a cost-volume-profit analysis is

As a business it is important to determine how changes in cost and volume can affect both their operating and net income. As a result, our small business accountants in Southbank undertake a cost-volume-profit analysis for companies in order to find out these results.

Firstly, when performing this analysis, our business accountants in Melbourne make these several assumptions:
- Sales price per unit is constant
- Variable costs per unit are constant
- Total fixed costs are constant
- Everything produced is sold

The analysis requires that all the company’s costs, including manufacturing, administration and selling costs are identified as variable or fixed.

A few key calculations also have to be made by our small business accountants in Melbourne, including the contribution margin, contribution margin ratio and the break-even point. When calculated as a ratio, the contribution margin ratio is the percent of sales dollars available to cover fixed costs. The break-even point is where sales revenue equals total variable cost plus fixed costs, and the contribution margin equals fixed costs.

For more information regarding a cost-volume-profit analysis, please contact our small business accountants in Southbank today.

 
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