TAMADOR_ACCT301_PP

College of Administration and Finance SciencesSEU ELITE
what is social responsibility?
Is about doing good for others and the
environment
What is CVP?
Cost-Volume-Profit analysis is a tool that
businesses use to understand the
relationship between costs, sales volume,
and profits, which assists them in making
better decisions to maximize profitability.
The relationship between them
Businesses can gain a better understanding of costs,
volume, and profitability through CVP analysis. Profitability
and societal welfare are aligned with sustainability and
accountability when social responsibility is integrated
Social Responsibility Integration:
Incorporating social responsibility into Cost Volume Profit
(CVP) analysis is essential for businesses to assess the
broader impact of their operations.
Transparency and Ethical
Decision-Making:
Integrating social responsibility promotes transparency
and ethical decision-making, aligning business practices
with stakeholders’ values.
Cost Consideration:
Factoring in the costs associated with social responsibility
initiatives, such as environmental sustainability or fair
labor practices, provides a comprehensive understanding
of the true cost structure.
Sustainable Business Growth
By considering social responsibility alongside CVP
analysis, businesses can foster sustainable growth
while making a positive societal impact.
The breakeven point
The point where a business does not experience any losses or gains
when total costs and total revenues are equal.
The indifference point
A cost indifference point is the point where the cost of both fixed
and variable alternatives is equal.
The margin of safety
The margin of safety is a financial ratio that determines how
much sales have exceeded the break-even point.
Social responsibility can significantly impact Cost-Volume-Profit (CVP) analysis in
both quantitative and qualitative ways, particularly in relation to customer
behavior. Quantitatively, it can affect cost structures, revenues, and sales
volumes. Qualitatively, it can enhance brand image, customer perception, and
competitive advantage.
Cost Accounting data
A bakery that sells cupcakes. Here’s how the break-even point concept can
be applied:
• Fixed Costs: Rent, oven maintenance, salaries of bakers (assuming they are paid a fixed amount regardless
of how many cupcakes are sold).
• Variable Costs: Ingredients, cupcake liners, packaging (costs that change based on the number of cupcakes
produced).
• Selling Price: The price the bakery charges per cupcake.
The break-even point will be the number of cupcakes the bakery needs to sell to cover all their expenses (fixed
costs + variable costs per cupcake) and make no profit or loss.
Cost Accounting data
Let’s say: Break-Even Point (Units) = $1,000 / ($1.00 – $0.50) = $1,000 / $0.50 = 2,000
cupcakes
• Fixed Costs = $1,000 per month
• Variable Cost per Cupcake = $0.50
• Selling Price per Cupcake = $1.00
We can use the break-even point formula to find the number of cupcakes the bakery needs to
sell to break even:
Break-Even Point (Units) = Total Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)
In this example, the bakery needs to sell 2,000 cupcakes each month to cover their expenses
and reach the break-even point. If they sell more than 2,000 cupcakes, they will start making a
profit. If they sell less than 2,000 cupcakes, they will incur a loss
Cost-Volume-Profit analysis is accompanied by
interpretations and key considerations:
• The balance between profit and social responsibility
• The relationship between costs and social impact
• Managing volume and social responsibility
• Breakeven point and ethical limits
• Safety margin and risk mitigation
Profitability and sustainability
Social responsibility can be
affected by the cost-volumeprofit analysis in multiple ways:
Environmental Impact
Community Engagement
Employee welfare
Ethical pricing
STC, is a telecom business in Saudi Arabia. The telecom provider in the nation is the
biggest due to their market capitalization, overall revenue, and workforce size. Internet,
digital television, landline, and mobile phone services are all part of STC’s
comprehensive suite of telecommunications services. Since its establishment in 1998,
the company has grown to become a significant player in the Middle Eastern telecom
market.
Conclusion
Incorporating social responsibility into Cost-Volume-Profit (CVP) analysis allows
businesses to balance profitability with ethical considerations like environmental
impact, community engagement, and employee welfare. By integrating social
responsibility into decision-making, businesses can achieve sustainable growth while
fulfilling their obligations to society. This approach fosters transparency, ethical
decision-making, and stakeholder engagement, ensuring long-term viability and
ethical integrity.
References
Murphy, C. B. (2024, January 27). Why social responsibility matters to businesses. Investopedia.
An introduction to cost volume profit analysis. (2024, March 1). Landingpage-v3.
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2017). Introduction to
Management Accounting (16th ed.). Pearson.
Eldenburg, L. G., & Wolcott, S. K. (2011). Cost Management: Measuring, Monitoring, and Motivating
Performance. Wiley.
our vision & value. (n.d.). https://www.stc.com.sa/content/stcgroupwebsite/sa/en/who-we-are/our-visionand-value.html