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Multi-product Cost Volume Profit Analysis – CIMA P1
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I probably should specify more the earlier question and replace “change in Inventory” to just Inventory.
What would be the correct answer? Is Inventory part of CVP analysis or not? What if by inventory they mean Production and Sales – do you think it makes any sense at all?
Good day,
I am having a bit of an argument wrt to a question about limitations of the CVP analysis listed in the Notes p75.
The question asks to choose False statements about the above. One of them says the following “CVP analysis does not take into account the change in Inventory” – I agree that it does not and do not choose it as a “False” one.
The opponent insists that because of the statement where Production=Sales, it is implied that an inventory is actually taken into account in CVP model.
Appreciate your comment.
Regards,
Gulmira
Almaty, Kazakhstan
Many thanks Mr.John Moffat for great lectures!!
Its straight to the point.Its very easy to understand most of chapter,but last chapter I need to watch again.I think that is the most difficult chapter in CIMA 馃檪
Just noticed, although I’m sure it doesn’t make a difference. Part (e) the table written is not in order of C/S ratios (P,C,V) but in order of P,V,C.
yes dont think he realised but i did mine of PCV
Just for interest sake what is the practical method that a REAL start-up business with multiple products (e.g 50) use when they want to have an idea/forecast break-even of their product lines.
Breakeven analysis would not really be of use to a departmental store. If they did want to use it then it could only really be done based on the overall average contribution they were earning per item.
It would only really be of use to either a small business or to a larger business thinking of launching a new product. So if Coca Cola were thinking of launching a complete new product then they could do a CVP analysis on the new product using the addition fixed costs that would arise as a result of producing the new product.
As I explain in the lecture, the multi-product analysis you need for the exam is actually a little bit impractical and would not really be of much use for most businesses.
Hi Sir
Thank you very much for the insightful lecture. I just wanted to ask how a bigger company/Departmental store with more than 1000 products can calculate break even point. (For example Coca Cola Has many products and each comes in different bottle sizes/packaging)