Product Profitability
This week we covered Chapter 5, Cost-Volume-Profit Analysis and Chapter 6, Variable Costing for Management Analysis. Cost-Volume-Profit Analysis is about formulas and ratios used to determine the profitability of individual products and/or operations. Variable Costing is a way to calculate profitability of a firms operations by either calculating the contribution margin or gross profit. Still using the company from your Week 1, please discuss how the contribution margin might be used to determine the profitability of that product and how its used to make the operations more profitable.
Please make an initial post and two replies to either your classmates or professor. The initial post must be at least 250 words with one external reference in APA format, while your replies must be at least 100 words.
View your discussion rubric.
Joshua Reaves
week 3 discussion
My company that I chose was Tesla. I think the contribution margin can have a big part in Tesla’s value when we speak about their battery that is used to charge and operate the vehicle. The company used to produce these vehicles have a huge part in Tesla’s success especially for some people who really believe in going green when it comes to vehicles. Tesla’s new approach is the million mile battery. This shows that the battery is a very important component to their vehicles and the longevity to them. If they could produce the same battery for less they would because they know it could work well and serve the same purpose. I think as long as they strive to find the best possible company to produce them then they can become even more profitable. Plenty of companies would love to have a contract with a very up and coming car company.
Latoya Edmond
Week 3
The contribution margin is the price of a product minus the variable costs. As a result, the contribution margin can be applied to the overhead costs to increase profitability. The contribution margin plays a vital role in assessing profitability when using variable costing methods. A general rule in business is that a positive contribution margin leads to profitability. Vercio (2017) stated that if price is greater than variable cost plus avoidable fixed costs, profit will be greater with the product than without the product (p. 90). As a result, managers can make decisions based on costs and price. The optimal price will yield the greatest profits while maintaining sales. Therefore, it is very important to assess all costs to set the best price for products.
Managers need to be aware of the variable costs and fixed costs when using the contribution margin. The break-even price or break-even point is number of products needed to cover all costs associated with producing a product. As a result, the contribution margin can help determine the number of products needed to make a profit. Therefore, managers can use the contribution margin to make production and pricing decisions to improve profitability.
Reference
Vercio, A. (2017). Contribution Margin and Fixed Cost per Unit: When to Use and When Not to Use These Analytical Tools. Journal of Corporate Accounting & Finance (Wiley), 28(2), 9093.
Discussion #2
Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be 75-150 words in length, and is due on Sunday. By Tuesday, you should respond to two additional posts from your peers.
Politicians have a strong incentive to follow a strategy that will enhance their chances of getting elected and re-elected. Political competition more or less forces them to focus on how their actions influence their support among voters and political contributors.
What is market failure, and what kinds of things can lead to market failure? What is government failure? Can government failure lead to market failure?
Review concepts like shortsightedness and rent seeking. What are the effects of government intervention in markets with some of the price regulations like price floors and price ceilings we discussed in chapter 4?
View your discussion rubric.
Angela Mull
W3 Discussion
What is market failure, and what kinds of things can lead to market failure?
Market failure occurs when markets don’t achieve complete efficiency and equity. Market failure can occur with efficiency losses, collusion, and less than perfectly competitive markets, such as monopolies.
What is government failure?
Government failure is when the government fails to protect individuals in its society. Government failure occurs when it fails to oversee markets to ensure market competition is highest, collusion is lowest and equity and fairness occur through the market exchange process.
Can government failure lead to market failure?
Yes, it can ooccur if actions taken by the government lead to misallocation of scarce resources or less market efficiency and equity. When the government does not step in to protect the rights of its societal members from large corporations by imposing laws to protect its citizens, the market can become heavily unbalanced in favor of large corporations hurting the consumers and therefore the market.
Jean Guerrier
WEEK 3 DISCUSSION
Market failure is an economic situation characterized by an inefficient distribution of services and goods in the free market. Free market fails to allocate resources efficiently. Things that leads to market failure can be environmental concerns, lack of public goods, abuse of monopoly power, over provision of demerit goods, underproduction of merit goods then negative and positive externalities. In simple words, a government failure is just an economic deficiency cause by government intervention. Government failure can absolutely lead to market failure. By intervening and attempting to solve market failure government can create different set of problems. The government intervention in market with some of the price regulations might create a deadweight loss. Price control might potentially increase consumer or producer surplus. Any gain might be outweighed by the losses sustained by the other side.
(n.d.). Retrieved from http://sites.bu.edu/manove-ec101/files/2014/10/EC1…
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