THE COST-VOLUME-PROFIT MODEL: A DISCUSS
 /  THE COST-VOLUME-PROFIT MODEL: A DISCUSS

THE COST-VOLUME-PROFIT MODEL: A DISCUSS

E. L. DABOR, Ph.D, John Ikponwosa OTALOR and Dominic Ose ERAH

Abstract
A good understanding of cost and revenue behavior is critical to providing decision makers with an understanding of the relationship between a project’s revenues, costs, and profits. Cost Volume Profit analysis emphasizes the interrelationships of costs, quantity sold, and price as well
as brings together all of the financial information of the firm. We set out to survey extant literature on cost-volume- profit analysis and attempted to shed light on the concept using the hermeneutics approach which focuses on the interpretation and explanation of a text with the intent to express its meaning to others. We concluded that since the model only serve as a useful guide in short-term decision making and its application is subject to a number of restrictive assumptions, decision makers should consider performing sensitivity analysis to determine whether and/or how the assumptions affect decision, take cognizance of the existence of multiple or several cost drivers and incorporate this into equation formulation of the model, as we believe that with this process more realistic results can be obtained.

Journal Article
PDF, 295.5 KB
Creative Commons LicenseCreative Commons license
Accounting, Banking and Finance
Accounting
Decision making, marginal costing, contribution margin, contribution graph, break- even chart, profit volume graph.
Christian Bassey
18th April, 2018
18th April, 2018
http://oer.mciu.edu.ng/wp-content/uploads/2015/04/80DABOR.pdf


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