Sample Essay

The model explains a variety of technical features of cost volume profit analysis, which shows the depth of cost and profit association. For instance if we take the cost function table below, this association can be easily analyzed with the help of computations and findings shown in this table:

Cost Function ($ milions)

Fixed Costs:

Rental Cost


Employee Wages


Total Fixed Cost


Variable Cost

Cost of Beverage and Snacks


Cost of Napkins, Straws etc


Total Variable Cost


Total Cost


Variable Cost estimation


Increase in Revenue 50%


Cost Function


Variable cost accounts for 50 percent of the revenue, which means with the increase in revenues variable cost increases significantly and the total cost will rise accordingly. To keep the cost burden low we can reduce our fixed cost to maximize profits. Fixed costs can be reduced in different ways: layoffs play a pivotal role in reducing fixed costs, utility expenses can be cut down to reduce fixed utility cost, other fixed expenses can be controlled to cope up with fixed costs. When sales increases for a company, the prime objective is to meet the profit targets that the firm sets in order to maintain its credibility and to gain strength in competitive and strategic terms. Through financial models these strategies are defined in policies to establish the criteria for a firm to meet its sales targets and to achieve maximum profitability.

Please order custom research paper, term paper, essay, thesis, dissertation, case study and coursework by clicking on Order Now.