Study of Mission Statement as a Marketing Strategy:

An Analysis of Amazon.com and Wal-Mart Mission Statement

BUS 5110 - Managerial Accounting

Portfolio Activity Unit 3
25 November - 1 December

Dr. Angela Palmer

Professor

This week has focused on using several cost analysis tools to determine how well products contribute to a
company’s profitability. However, all of these tools are internally used and not required to be published outside
of an organization. Instead, external stakeholders rely on the three key financial statements reviewed in Unit 1:

• Income Statement
• Balance Sheet
• Statement of Cash Flows

If a company’s CVP analyses showed it was not operating at break-even, where on the financial statements
might one be able to see this impact (i.e., specific line items on the statements)?

As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to:

• Your personal experiences

• Course readings and any external readings.
• Discussion forum posts or other course objectives that tie into your reflection.

The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use APA
citations and references if you use ideas from the readings or other sources.

This assignment will be assessed using the Portfolio rubric.

 Introduction

Break-even analysis, also known as profitability analysis, is used by executives to

create short-term goals and objectives. By analyzing changes in sales prices, costs, and volume,

management may get insight into a company's profitability (in the short term).

Executives often use CVP as a breakeven analysis method. Break-even points may be

calculated in a variety of ways. Divide fixed costs by output price, multiply by total variable

costs, and then deduct all variable costs from your budget. To arrive at a final figure, add all

variable production expenses. Manufacturing expenditures may be characterized as fixed or

variable. In contrast to variable costs, fixed costs remain constant regardless of the quantity of

units sold; this is the inverse of variable costs.

Profit margins for new products may be calculated by comparing your firm's fixed

expenses to the revenue received by each. Due to their lower average fixed costs, smaller firms

are expected to fail at a far higher rate than bigger ones. Take the following example: After

selling your first product, your business will rapidly become profitable, as long as variable

expenses do not exceed sales revenue. Even in the absence of fixed expenses, break-even may

come fast if variable costs do not exceed revenue.

The cost-volume-profit (CVP) approach, according to Heisinger and Hoyle (1999), is

used to anticipate breakeven and objective profit levels for both units sold and dollars earned.

According to the book's authors, changes in cost and volume, Kenton and Johnson (2021), have

a significant impact on operational profit. Cost-Volume-Profit analysis, therefore, is very

useful to stakeholders other than the company's management since it has a substantial impact

on their decision-making.
 A company's total revenue and contribution margins must match its fixed costs to be

termed breakeven. The income statement will demonstrate whether a firm does not produce

enough money to cover its costs. Profitable businesses are referred to as "above breakeven,"

whereas losing businesses are "below breakeven." If revenue does not match expenditures and

expenses, the firm approaches the "breakeven point," after which it begins to lose money and

finally goes out of business.

Reflection

I learned the dangers of neglecting CVP analysis when my friends and I created a small

pizza shop in Manila named “Angels Praises Pizza”. As a marketing strategy, we do not have

minimum orders, and we deliver all orders which came to us, including a "solo pizza".As we

sell "solo pizzas", we then realized that the delivery cost for "solo pizza" is almost as much as

to deliver a "family pizza". Because the "solo pizzas" are too small, we could not charge enough

to cover its delivery costs. At one point, we were so busy producing and delivering "solo

pizzas" that we did not have time to determine that we were actually losing money on them.

Had we performed CVP analysis, we would be able to realize how much pizza we need

to deliver in order for us to at least cover the cost and eventually determine at what point are

we going to have a profit.

A cost-volume-profit (CVP) analysis can only be carried out properly if management

understands the link between costs and profits. Regardless of price, the ultimate goal of every

company is to maximize profits at whatever cost. Production costs and sales volume heavily

influence profitability. The expenses of a corporation are directly proportional to the number

of goods produced. They duplicate previous costs as a result of a complicated set of

circumstances. Every aspect of the business influences production volume to product mix,

internal efficiency, and manufacturing techniques.

Many of the ideas and tactics offered in this course had a significant influence on my

personal growth. CVP is one of the most perplexing concepts I have ever come across.

Businesses of all sizes may benefit from doing a CVP study to aid in decision-making. CVP

might help managers and decision-makers comprehend the impact of strategic choices on

profitability and business stability.

Word Count: 655

 References

Adar, Z., Barnea, A., & Lev, B. (1977). A comprehensive cost-volume-profit analysis under

uncertainty. Accounting Review, 137-149.

Dugan, M. T., & Shriver, K. A. (1992). An empirical comparison of alternative methods for the

estimation of the degree of operating leverage. Financial Review, 27(2), 309-321.

Garrison, R. H., Noreen, E. W., Brewer, P. C., & Mardini, R. U. (2003). Managerial accounting. New

York: McGraw-Hill/Irwin.

Gutiérrez, M. (2021). Making better decisions by applying mathematical optimization to cost

accounting: An advanced approach to multi-level contribution margin

accounting. Heliyon, 7(2), e06096.

Gutierrez, P. H., & Dalsted, N. L. (1990). Break-even method of investment analysis (Doctoral

dissertation, Colorado State University. Libraries).

Heisinger, K., & Hoyle, J. B. (n.d). Accounting for Managers.

https://2012books.lardbucket.org/books/accounting-for-managers/index.html

Horngren, C. T. (1967). A contribution margin approach to the analysis of capacity utilization. The

Accounting Review, 42(2), 254-264.

Kenton & Johnson. (2021). Cost-Volume-Profit (CVP) Analysis Definition.

https://www.investopedia.com/terms/c/cost-volume-profit-analysis.asp

Sarkar, S. (2018). Optimal DOL (degree of operating leverage) with investment and production

flexibility. International Journal of Production Economics, 202, 172-181.

Tambrino, P. A. (2001). Contribution margin budgeting. Community College Journal of Research &

Practice, 25(1), 29-36.

Tsorakidis, N., Papadoulos, S., Zerres, M., & Zerres, C. (2011). Break-even analysis. Bookboon.

Walther, L. M., & Skousen, C. J. (2009). Managerial and cost accounting. Bookboon.