Finance response

Description

Respond to following post below–  Instructions —-Your reading and follow-up response to a fellow student’s discussion reply should not be a general acceptance of his or her opinion, but rather something that challenges the student to defend his or her stated response, or something that presents an alternate idea or additional analysis. Again, research should be used as evidence in your follow-up responses. Participate in the discussion by asking a question, providing a statement of clarification, providing a point of view with a rationale, challenging an aspect of the discussion, or indicating a relationship between one or more lines of reasoning in the discussion. Follow-up posts should also be substantive and include support from examples and correctly cited research when possible. Follow-up posts usually should not exceed 300 words. Often, they will be approximately 100 to 200 words in length. Remember though, substance is more important than word count. Simply agreeing or disagreeing is not considered substantive. One or two sentences are not usually considered substantive. The dialogues should be useful conversations that analyze topics both broadly and deeply, providing evidence (research) that supports your response. The cost-volume-profit (CVP) analysis is a method for determining volume fluctuations on costs and profits. It will offer helpful information about profitability based on different expenses, volumes, and price forecasts, and assumptions. Managers can use this information to decide on “future courses of action about pricing and the launch of new offerings” (Gapenski & Reiter, 2016). Firm X has a revenue of $40 per unit and a variable cost rate of $25, leaving a contribution margin of $15, as seen in the CVP graphs for Firm X and Firm Y. Firm Y has a $40 per unit revenue and a $10 variable expense rate, leaving a $30 contribution margin. On the other hand, Firm X has a fixed cost of $18,000, indicating that they have more direct labor costs in their cost system, while Firm Y has a fixed cost of $30,000, indicating that they are more automated ( Given that taking a discounted fee-for-service rate would reduce the amount of revenue per company earns per unit sold, the graphs for Firms X and Y would change if the fixed and variable cost rates remained constant compared to the number of units sold. While the total cost line in both graphs would stay the same, the steepness of the total sales upward-sloping line on either graph would reduce to match the decrease in revenue per segment, bringing the breakeven point further to the right. For the providers to break even and begin making a profit, additional units would need to be sold. Regardless of the amount of services rendered in a capitated setting, revenues are set per member per time. In this situation, no matter how many units are shipped, total revenue is fixed.  As a result, on all graphs, the upward sloping lines representing total sales would shift to a smooth (horizontal) line (assuming the x-axis represents units sold), meaning that total revenue would remain constant independent of unit volume sold. Hence, to make a profit, the vendors will be compelled to reduce the number of units delivered. The providers will incur a financial loss if the gross costs of supplying those units outweigh the fixed total sales sum. Given that the contribution margin will begin contributing to earnings after fixed costs have been offset (Gapenski & Reiter, 2016), Firm Y will be in a great position to expand its business if the units sold remained stable. Not only are the net costs lower, allowing them to break much faster, but they still have a higher contribution margin of $30 as opposed to Firm X’s $15 contribution margin, resulting in a higher profit. On the other hand, Firm Y would suffer more significant losses as the economy suffers a downturn, lowering demand ( References Gapenski, L. C., & Reiter, K. L. (2016). Healthcare finance: An introduction to accounting and financial management (6th ed.). Chicago, IL: Health Administration Press. S CVP-graph. Retrieved from