| What is a cost-volume-profit analysis? | Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin. |
| How is the break even point calculated and what does it say? | The breakeven point shows how many units must be produced and sold to break even (not loose any money but not earning any either). |
| What is a targeted operating profit and how do we calculate it? | The targeted operating profit is a way of calculating if we want our targeted operating profit to be for instance 1.200 EUR. |
| What is the margin of safety and how is it calculated? | The amount by which sales can drop before losses begin. |
| What is sensitivity analysis? | Sensitivity analysis is a “What if” technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes.
These types of questions can often be answered by calculating if there is a loss or not. For instance, using the break-even point, margin of safety. |
| What is the operating leverage? | Operating leverage measures the relationship between a company’s variable and fixed expenses. It is greatest in organisations that have high fixed expenses and low per unit variable expenses. |
