engleski

Justification of cost-volume-profit analysis in Croatian manufacturing enterprises

Cost-Volume-Profit (CVP) analysis examines the effects of changes in costs and a range of business activities on the company’s profit. The basic assumption of the analysis is that if the selling prices are higher than the variable costs, an increase in the amount of production allows an increase in the coverage of fixed costs and ultimately profit realization. The break-even point is the point at which the total costs are equal to total revenues. It shows the level of production and sales in which the company covers its total costs at a specific selling price. Break-even analysis is an internal management tool used as an aid for business planning and short-term decision making. In this paper, the break-even point of a pastry shop is analyzed. The pastry shop provided dana on its five best-selling products. The data showed that the largest total cost of production has product “p4” due to its highest fixed costs, while product “p5” represents the biggest gain. It is concluded that the pastry shop should increase the production of this product. If an entrepreneur estimates that the coverage area is attainable, it continues with the production process ; however, if the inability to produce a satisfactory range is assessed, the entrepreneur undertakes certain measures such as a reduction in a variable or fixed costs and an increase in the selling price. There is also a possibility of abandoning the production of a specific product or auditing a profit goal at a lower level.

cost-volume-profit analysis, break-even point, the production range

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