Discussion 1 Prior To Beginning Work On This Discussion Plea

Discussion 1prior To Beginning Work On This Discussion Please Read Th

Discussion 1 prior to beginning work on this discussion, please read the article A Case Method Approach of Teaching How Cost-Volume-Profit Analysis is connected to the Flexible Budgeting Process and Variance Analysis. The authors, Machuga and Smith (2013), present a multidisciplinary case-method approach to help students who want to start a successful business understand the steps necessary to achieve their desired profits using cost-volume-profit (CVP) analysis. The case-method emphasizes the importance of CVP analysis and how it ties directly into the planning and control processes any management must take to start a potentially successful business.

After reading the aforementioned Machuga and Smith article, in an initial post of at least 200 words, discuss how cost-volume-profit (CVP) analysis and flexible budgeting can enable students to understand the different stages involved in starting up a business, projecting out results, and monitoring business performance (Machuga & Smith, 2013).

Guided Response: Review several of your peers’ posts. In a minimum post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered in regard to how CVP analysis directly ties into the planning and control processes management must take to start a potentially successful business. Do you agree with your peers’ findings? Why or why not?

Paper For Above instruction

Starting a new business involves multiple financial planning and performance monitoring processes that are fundamental to ensuring long-term success. Cost-Volume-Profit (CVP) analysis and flexible budgeting are two critical tools that provide a structured approach for understanding and managing these processes effectively. As discussed by Machuga and Smith (2013), CVP analysis allows entrepreneurs and managers to evaluate how changes in sales volume, costs, and price levels impact the company's profitability, thus enabling strategic decision-making during startup phases. It helps identify breakeven points and profit margins, guiding entrepreneurs in setting realistic sales targets and cost controls.

Flexible budgeting complements CVP analysis by providing a means to adjust financial plans based on actual business activity levels. Unlike static budgets, flexible budgets adapt to actual sales volumes and operational changes, offering a more accurate picture of financial performance. This combination equips students with a comprehensive understanding of how to project financial results under various scenarios, such as different sales volumes or cost structures, which are vital for startup planning reliability.

Moreover, these analytical tools facilitate ongoing performance monitoring. Entrepreneurs can compare projected outcomes with actual results, identify variances, and implement corrective actions promptly. This active monitoring supports a dynamic approach to managing uncertainties and operational challenges during the startup phase. As Machuga and Smith (2013) highlight, integrating CVP analysis with flexible budgeting fosters better planning and control, enabling new businesses to adapt swiftly to market fluctuations and internal cost changes.

In essence, CVP analysis clarifies the relationships among costs, volume, and profit, serving as a foundational element in business startup strategies. When combined with flexible budgeting, it provides a versatile framework for projecting outcomes and monitoring ongoing performance. Together, these tools empower students and budding entrepreneurs to make informed, data-driven decisions, ultimately increasing the likelihood of achieving desired profits and sustaining business growth.

References

  • Machuga, S., & Smith, P. (2013). A case method approach of teaching how cost-volume-profit analysis is connected to the flexible budgeting process and variance analysis. Journal of Applied Business and Economics, 15(2), 83–96.
  • Rosendahl, K. (2017). Rovio Entertainment reports 34% revenue growth in 2016. Forbes. https://www.forbes.com/sites/krisrosendahl/2017/02/28/rovio-entertainment-reports-34-revenue-growth-in-2016/
  • Rosendahl, K. (2016). Investors take flight after Angry Birds maker warns on profit. Forbes. https://www.forbes.com/sites/krisrosendahl/2016/10/06/investors-take-flight-after-angry-birds-maker-warns-on-profit/
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  • Horngren, C. T., Datar, S. M., & Rajan, M. (2015). Cost accounting: a managerial emphasis (15th ed.). Pearson.

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