Planning and Decision Making: CVP Analysis and Strategy and Master Budget

Discussion Reply on the below thread: 1 page and 4 peer reviewed articles from (2017-2021) please use APA 7 and include the DOI in reference area: Examining the relationship between Cost Volume Profit Analysis (1paragraph) and Strategy and Master Budget(1 paragraph) with how it affects strategic allocation of financial resources (1 paragraph).

1 page and 2 peer reviewed articles from (2017-2021) please use APA 7 and include the DOI in reference area: Use the Bible and other sources to provide biblical application of Cost Volume Profit Analysis (1paragraph) and Strategy and Master Budget(1 paragraph) with how it affects strategic allocation of financial resources (1 paragraph).All resources need to be done in this format as an example : Drollinger, T., Comer, L. B., & Warrington, P. T. (2006). Development and validation of the active empathetic listening scale. Psychology & Marketing, 23(2), 161-180. https://doi.org/10.1002/mar.20105

ANSWER

Planning and Decision Making: CVP Analysis and Strategy and Master Budget

Cost Volume Profit Analysis

Cost volume analysis is a means of finding out how changes in fixed and variable costs impact profit (Lulaj and Iseni, 2018). In cost volume profit analysis, an entity allocates its costs based on the expected relationship between costs and volumes over a certain time horizon. There are two common ways to determine costs under CVP: variable costs and fixed costs. Variable costs are those expenses that change in proportion with changes in production or sales levels, while fixed costs remain unchanged regardless of how much a company produces or sells (Rogulenko et al., 2021). The CVP analysis offers management insight into the links between three variables; output volume, cost structure, and benefit. The cost volume profit analysis is relates to the bible by the cost of believing in God and lifetime blessings. According to John 11:40 God only answers the prayers of those that believe in him.

Strategy and Master Budget

Budgeting systems enable the management to reach their goals through controlling and planning cash inflows and outflows through expenses and payment (Liwaul, Rosika, Purwati, and Hamryati, 2017). Strategy and Master Budget are used by management to determine the allocation of resources for a project since they offer the projection of the overall company. Ideally, the master budget entails the planned operating budget and projected income statement. Strategy and master budget takes information from many sources, such as the business plan, strategy, and project budgets. This then goes on to discuss how an organization must consider all costs associated with projects against development time and geography when choosing whether cost optimization would fit within given constraints. Strategy and mastery budget relate to the Bible in the book of Luke 14:28-30 which talks about building a tower. The scripture says that when building a tower you need to know the cost of necessities which do not come up the right way without having a master budget.

Strategic Allocation of Financial Resources

Cost volume profit analysis (CVP) is a type of financial allocation tool used to determine the selling prices and production outputs for at least one period of time (Abdullahi et al., 2017). Cost volume profit analysis is a technique used in determining the interrelationship between sales, costs, and net profit. The cost volume profit analysis looks primarily at the impacts of different activity levels on the financial results of the business. CVP analysis is employed to examine the financial implications of pricing, product mix, process improvement, and product decisions. Ideally, the cost volume profit analysis emphasizes on interrelationships of price, quantity sold, and costs which brings all the financial information together.

The CVP analysis focuses on answering strategic financial questions such as the required funding level of a firm to reach desired product and service level. CVP analysis has been an essential technique for the management of financial resource allocation in capital budgeting decisions (Michelon, Lunkes, and Bornia, 2020). In financial resource allocation, executives and managers have to clearly evaluate the relationship between fixed costs, variable costs, and production. Managers use CVP to allocate finances to help guide business decisions such as product pricing and production.

Ideally, financial allocation entails the process of allocating costs and revenues to a particular product, activity, or period. Strategy and master budget play an important role in allocating resources by translating revenue into specific expenses. The master budget consists of three primary components: the sales quota for each product, the production budgets for each product line, and the cash-bought budgets.

By using the elements of strategic planning, one can map out how much money will be dedicated towards each future financial period. This method ensures that money is allocated towards projects that are more beneficial to the company (Pérez and Bojórquez Zapata, 2020). The allocation of benefits and costs through budget decisions impacts financial actions within a business. The resource allocation is connected to the strategic plan of the future, which leads to the effect of strategy and master budget. This is because strategy and master budget offer a financial expression of objectives for the coming period.

References

Abdullahi, S. R., Sulaimon, B. A., Mukhtar, I. S., & Musa, M. H. (2017). Cost-Volume-Profit Analysis as a Management Tool for Decision Making In Small Business Enterprise within Bayero University, Kano. In IOSR Journal of Business and Management (Vol. 19, Issue 02, pp. 40–45). IOSR Journals. https://doi.org/10.9790/487x-1902014045

Lulaj, E., & Iseni, E. (2018). Role of Analysis CVP (Cost-Volume-Profit) as Important Indicator for Planning and Making Decisions in the Business Environment. In European Journal of Economics and Business Studies (Vol. 4, Issue 2, p. 104). EUSER. https://doi.org/10.26417/ejes.v4i2.p104-120

Pérez Brito, A. E., & Bojórquez Zapata, M. I. (2020). Strategic Planning as an Important Factor in Business Management. In Business, Management and Economics Research (Issue 68, pp. 99–106). Academic Research Publishing Group (Publications). https://doi.org/10.32861/bmer.68.99.106

Liwaul, L., Rosika, R., Purwati, Hj. N. E., & Hamryati, H. (2017). Analysis of Performance-Based Budgeting System Implementation in Improving Organizational Effectiveness. In IOSR Journal of Business and Management (Vol. 19, Issue 06, pp. 62–70). IOSR Journals. https://doi.org/10.9790/487x-1906026270

Michelon, P. de S., Lunkes, R. J., & Bornia, A. C. (2020). Capital budgeting: a systematic review of the literature. In Production (Vol. 30). FapUNIFESP (SciELO). https://doi.org/10.1590/0103-6513.20190020

Rogulenko, T., Orlov, E. V., Smolyakov, O. A., Bodiako, A. V., & Ponomareva, S. V. (2021). Analytical Methods to Assess Financial Capacity in the face of Innovation Projects Risks. In Risks (Vol. 9, Issue 9, p. 171). MDPI AG. https://doi.org/10.3390/risks9090171