Week Four Discussion Questions
· What are the components of cost–volume–profit (CVP) analysis? How does a CVP income statement help management make decisions?
· What is break-even analysis and how does it work with cost–volume–profit analysis? As a manager, what decisions would you make to achieve a lower break-even point?
· How might you handle the break-even analysis for multiple product lines?
· Imagine Widgets Airlines, Inc. operates 18-seat commercial flights between New York City and Washington, DC. After 10 seats have been sold on each aircraft, the company has reached the break-even point. Should Widgets consider offering a discounted fare for seats 11 through 18? What are the advantages and disadvantages of not offering a discount on seats 11 through 18? What are the advantages and disadvantages of offering a discount on seats 11 through 18? How would you decide how much of a discount, if any, could be offered? What effect would the discount have on the financial statements of Widgets Airlines, Inc.?