IUPUI Cost Volume Profit Analysis Discussion

Objective:

To critique the assumptions of cost-volume-profit analysis

Instructions:

• Watch YouTube video “Critical Assumptions of Cost-Volume-Profit Modeling”

https://www.youtube.com/watch?v=CDVgvoOpcbM

• Task 1. Answer the following questions.

a. Among all assumptions in the video, which one do you think is the most critical? Explain.

b. How will you change the cost-volume-profit analysis if the assumption (you identify in the previous question) is not valid? Use a specific cost-volume-profit analysis (e.g., breakeven analysis) to explain.

Task 2. Comment on at least two fellow classmates.

Your comment/suggestions should be genuine, authentic, and add value to the continuing discussion.

Example 1: This example is a nice encouragement to the author but does NOT add much value to the continuing discussion.

Student 1: I love bread.

Student 2: I agree with you! I love bread too. I love the part when you said you loved bread. Great point!

Example 2: This example is an authentic and quality comment which summarized what the author said and offered the commenting person’s own opinion.

“<Name>, nice work on the summary and responses to the questions. I think this merger is a great example of why these ratios and metrics are important and must be considered relative to companies in the same industry. For example, I learned in this article that having high amounts of debt is common for telecom companies because of their reliable revenue stream. In general, it seems that their logic is that if the economy goes south, their customers are locked into their contracts and thus are likely to continue paying instead of buying out their contracts. That is a benefit that I’m sure most retail companies wish they had!”