CostVolumeProfit Analysis Investigation Project – Chapter 8
Ana Duff, adapted from work by J. Olivier and D. Lippman
Modeling data for CostVolumeProfit Analysis
Getting the data

Create a document in Microsoft Word and add the heading CVP Analysis Summary.

Get the data:
 Download the Excel file CVP Analysis Data.
 Save the document.

Open https://www.desmos.com/calculator
Cost model

Open a new folder and name it Cost.

Select the data in costproduction worksheet and copy into Cost folder
 Make note that the data variables created by Desmos are [latex]x_1[/latex] and [latex]y_1[/latex]. You can change these but will have to make the corresponding changes to formulas used below as well.

Analyze the data trend and decide on an appropriate function type to model the cost data

 Cost data appears to follow a linear trend
 Should try [latex]C(x)=mx+b[/latex]

Create an appropriate cost function model using the Desmos regression tool
 In Cost folder, add y1~mx1+b to a new line in the folder

Write the cost function model and plot it:
 In Cost folder, add the appropriate formula for , with appropriate domain restrictions;
 Hide the regression model and the data.

Hide and minimize Cost folder:

Record in your CVP Analysis Summary document the cost function model and its domain.
Pricedemand model

Open a new folder and name it Pricedemand.

Copypaste data from PriceDemandData file into PriceDemand folder.

Adjust scaling of the axes for a better view
 Click on Graph Settings tool and adjust the horizontal and vertical view window.

Analyze the data trend and decide on an appropriate function type to model the cost data
 Pricedemand data appears to follow a quadratic trend
 Should try [latex]p(x)=ax^2+bx+c[/latex]

Create an appropriate pricedemand function model using the Desmos regression tool
 In pricedemand folder, add y2~ax2^2+bx2+c

Write the cost function model and plot it
 In Pricedemand folder, add the appropriate formula for , with appropriate domain restrictions;
 Hide the regression model and the data.

Hide and minimize Pricedemand folder

Enter into your CVP Analysis Summary document the price function model and its domain.
Revenue model

Open a new folder and name it Revenue

Write the revenue function and plot it

Adjust scaling of the axes for a better view
 Zoom out until the whole graph is visible, then click on Graph Settings tool and adjust the horizontal and vertical view window.

Hide and minimize Revenue folder

Determine the maximum revenue amount and when it occurs (demand and price).

Enter into your CVP Analysis Summary document the following:
 the revenue function model
 the maximum revenue amount and when it occurs (demand and price).
Profit model

Open a new folder and name it Profit

Write the profit function and plot it

Hide and minimize Profit folder

Determine the maximum profit amount and when it occurs (demand and price).

Enter into your CVP Analysis Summary document the following:
 the profit function model
 the maximum profit amount and when it occurs (demand and price).
Costvolumeprofit analysis chart

Create a new folder titled CVP Analysis

Plot the cost, revenue and profit models

Adjust scaling of the axes for a better view
 Zoom out until all three graphs are fully visible, then click on Graph Settings tool and adjust the horizontal and vertical view window.

Add points of interest to the graph: fixed cost, maximum revenue, maximum cost, maximum profit and breakeven points
 Click on the graph around each point of interest and note the value of the point as identified by Desmos;
 Plot and label each point on the graph.

Mark regions of profit and loss
 Plot area where revenue is higher than cost: ;
 Plot area where cost is higher than revenue: .

Finalize the CVP Analysis Graph
 Minimize CVP folder;
 Add graph arrows and axes titles using Graph Settings tool.

Complete your CVP Analysis Summary document by adding the following:
 the breakeven demand, price and revenue
 the link to the graph through Share Your Graph – Copy Link tool and insert it into the Word document;
 the image of the graph by first downloading it using Share Your Graph – Export Image tool, then copying into the submission document.
THE END
Attribution: Created by Ana Duff (Ontario Tech University), published under Creative Commons AttributionNonCommercialShareAlike licence (CCBYNCSA)
Any modifications to this case study may affect its solvability and caution is advised.