1. What are the components of cost-volume-profit (CVP) analysis?

2. How does a CVP income statement help management make decisions?

3. In order for a company to attain its financial goals, decision makers need to have an understanding of how activity levels impact business cost. In many businesses, It is management that has the responsibility of controlling cost by monitoring budgets, while implementing action steps to maintain or increase revenues.

Reflecting on your reading of chapter 18 respond to the following question:

How does variable and fixed cost affect how cost responds to changes in the level of business activity? Offer an explanation both fixed cost and variable cost.

4. How does a company’s operating leverage effect its profitability?

5. In what type of business decisions can incremental analysis be used?

6. Watch the “Author’s Corner: Break Even and Cost-Volume-Profit Analysis” video. Consider the following as you watch:

• Why is it important for a manager to understand break-even or cost-volume-profit analysis?

7. Watch the “Author’s Corner: Incremental Analysis” video. Consider the following as you watch:

• What is incremental analysis?

8. Watch the “Author’s Corner: Incremental Analysis” video. Consider the following as you watch.

• In what types of situations is incremental analysis most useful?