Accounting and Finance for Engineers Part One Unit 6: CVP Analysis
What are costs in business?
This unit will introduce you to the important subject of costs. Costs are incurred in a number of different ways and for different reasons. A full understanding of the structure of costs within an organisation is crucial to the formulation of future strategies and for day-to-day decisions.
The unit starts with some basic definitions of types of costs, giving examples to illustrate meanings. The cost / volume / profit trilogy is then introduced and the fundamental relationship between them is derived and used for a few example business decisions. The concepts of contribution and margin of safety are then introduced to complete the picture of costs.
To make this unit really valuable to you, use the information contained as a guide to you exploring your own company’s financial management – this way your understanding and ability to apply what you are learning will be much greater. There are prompts to look for specific pieces of information and specific questions as you go through the unit.
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Professor Tony Ward
Tony is Professor of Engineering Management in the Department of Electronics at the University of York where he has worked for 25 years. Prior to that he spent 18 years in Industry as an electronic design engineer, technical manager and programme manager for a number of different companies. Within York he has held the position of Provost of Alcuin College and Director of the Centre for Excellence in Teaching and Learning in Enterprise. Externally he has been President of the European Association for Education in Electrical and Information Engineering and managed or participated in over 20 research projects. He has published 17 journal papers, over 100 conference papers, given over 20 invited lectures or keynotes and written or contributed to 8 books or formally published reports. His research is in area of Engineering Education and Entrepreneurship. He is the founder and Chairman of Skillsforge Ltd. A competence management and course booking spinout business from the University of York.
• To demonstrate the nature of costs and to show that costs do not always behave linearly with activity;
• To introduce you to the Cost-Volume-Profit (CVP) analysis;
• How to work out the break even volume of any product;
• To demonstrate the power of CVP analysis in business decision making.
• Engineers who aspire to management positions
• Non-financial employees who want to learn the basics of accounting and finance
• Individuals wishing to start their own business