Cost-Volume-Profit Analysis | Free Essay Example

Cost-Volume-Profit Analysis

Words: 406
Topic: Business & Economics

Summary: Firstly, it could be said Activity-Based Planning was regarded as the most efficient approach while comparing it to Traditional Costing, as it covers the generation of prices from dissimilar angles, eliminates the formation of unrealistic prices, and has the implications in different spheres (Yanpirat and Maneewan n. pag.). Nonetheless, the proposed application strategy of ABP is limited and requires enhancement.

Consequently, the initial goal of the paper is to introduce a mechanism, which will optimize the financial planning and determine an appropriate level of pricing for the maintenance service while using the Activity-Based Costing system (ABC) for small and medium companies (Yanpirat and Maneewan n. pag.). As for the methodology, the authors utilize Fuzzy-Based Cost-Volume-Profit (FCVP) and apply it in the context of the selected cases (Yanpirat and Maneewan n. pag.).

In this case, CVP implies conducting the analysis to compare the correlation between costs and profits (Yanpirat and Maneewan n. pag.). In turn, it is apparent that the authors of the article designed the mathematical and logical equitation while considering different variables including the number of the workforce per customer, costs per completed job, profit, fixed costs, and other aspects (Yanpirat and Maneewan n. pag.).

Meanwhile, this equation takes into account the fuzziness of the metrics due to potential fluctuations in forecasting. In the end, the findings and analysis contribute to the improvement of the efficiency of the organizational decision-making, affect the overall profitability positively, and contributes to the understanding of the budgeting process by using the ABC model. (Yanpirat and Maneewan n. pag.).

Reaction: It could be said that this article expands my understanding of the principles of budgeting and planning, as it defines the key terms and concepts critically. Meanwhile, it can state that the rationale for the improvement of the framework is identified profoundly while explaining the benefits of its implementation. I can freely claim that the proposed resolution is interesting and creative, as the usage of mathematical concepts provides insights into financial planning.

The new mathematical model considers different variables as important while increasing the accuracy of results related to the formation of the price for the maintenance service. Furthermore, another crucial aspect is the possibility to highlight the essentiality of uncertainty, as this feature also contributes to the minimization of errors related to planning. In the end, it could be said that the proposed strategy could be actively employed in different spheres while enhancing the company’s profitability and efficiency.

Work Cited

Yanpirat, Patcharaporn, and Jittarat Maneewan.Employing Fuzzy-Based CPV Analysis for Activity-Based Costing for Maintenance Service Providers.” Proceedings of the International MultiConference of Engineers and Computer Scientists 2 (2012): n. page. Web.