Lab $3\mathrm{.}4$ Excel: Conducting Cost$-$Volume$-$Profit Analysis Under Different Assumptions

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Conducting Cost$-$Volume$-$Profit Analysis Under Different Assumptions

Data Analytics Types: Diagnostic Analytics, Predictive Analytics

Lab Note

The tools presented in this lab periodically change. Updated instructions, if applicable, can be found in the student and instructor support materials. All Lab Exhibits are available within the eBook and in Connect.

Keywords

CVP Analysis, Fixed Costs, Variable Costs

Decision$-$Making Context

The CVP framework helps managers understand the relationship between revenues, costs, volume, and profitability. Using the CVP framework, managers can analyze how changes in prices, product inputs, and volume will change financial performance.

ProSports is a manufacturer of sports equipment. Data for ProSports$$ basketball division are presented in a contribution margin income statement, also known as a variable costing income statement. Recall that when using variable costing, all variable costs are subtracted from revenues to calculate contribution margin. Then, all fixed costs are subtracted from contribution margin to calculate operating income.

In this lab, we will use goal$-$seek analysis within the CVP framework. Goal$-$seek analysis is a what$-$if prescriptive analytics technique that tells us the required input needed to reach a desired outcome, output, or result.