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Running Head: WEEK 3 PROJECT
WEEK 3 PROJECT
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WEEK 3 PROJECT
Analyze how the CVP analysis helps management in the planning stage of a new business.
CVP analysis is determination of the point at which the total revenue is equal to its total
expenses incurred. CVP analysis includes analyzing the price level of the products at which it is
equal to its actual cost (Stice & Stice, 2016). It is no profit no loss situation, which must be
reached by every buyer and is required to be determined by every management in order to avoid
loss (Stice & Stice, 2016). This analysis is very helpful for the management at the planning stage
of the business as it helps them in setting and deciding the prices and in further amending their
business plans (Stice & Stice, 2016). This analysis helps them in deciding whether the product
will be profitable in the current business and production line and how many units will need to be
sold in order to avoid loss and achieve break even (Stice & Stice, 2016). This analysis also tell
the business owners or decision makers that how the company’s net income and operating
income changes with changing cost and volume effect of their products and services, so that they
can plan their production and marketing activities accordingly to remain in competition and to
cope with their expenditures for remaining profitable.
What is the break-even quantity for each of the investment alternatives?
The each investment alternative has same selling price, whereas the fixed cost of
investment alternative 1 is $80,000, which is quite higher than alternative 2. The determination
of breakeven quantity of each alternative will help management of Vanda Laye Corporation to
determine how many units to sell as a result of each investment in order to avoid loss. The
breakeven quantity of each alternative can be determined using following formula:
Breakeven Quantity = Fixed costs / (Price per unit Variable costs per unit)( Kampf, Majerčák
& Švagr, 2016)

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1 Running Head: WEEK 3 PROJECT WEEK 3 PROJECT Student Name Institution Affiliation 2 WEEK 3 PROJECT Analyze how the CVP analysis helps management in the planning stage of a new business. CVP analysis is determination of the point at which the total revenue is equal to its total expenses incurred. CVP analysis includes analyzing the price level of the products at which it is equal to its actual cost (Stice & Stice, 2016). It is no profit no loss situation, which must be reached by every buyer and is required to be determined by every management in order to avoid loss (Stice & Stice, 2016). This analysis is very helpful for the management at the planning stage of the business as it helps them in setting and deciding the prices and in further amending their business plans (Stice & Stice, 2016). This analysis helps them in deciding whether the product will be profitable in the current business and production line and how many units will need to be sold in order to avoid loss and achieve break even (Stice & Stice, 2016). This analysis also tell the business owners or decision makers that how the company’s net income and operating income changes with changing cost and volume effect of their products and services, so that they can plan their production and marketing activities accordingly to remain in competition and to cope with their expenditures for remaining profitable. What is the break-even quantity for each of the investment alternatives? The each investment alternative ...
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