Cost Value Profit analysis

CVP Analysis
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Samsung is a multinational corporation that prides itself on being able to provide a wide variety of electronic devices. The electronic devices offered by the firm are based on a comprehensive market study to help the business understand the consumer needs. The company posted $223.4 billion in terms of revenue in the last financial year. The concept of cost-volume-profit analysis has been used to ensure the business continues to enjoy a growth in the profit margins.
CVP analysis is based on a number of assumptions and takes into accounts items such as the volume of sales, the variable costs, the fixed costs, the sales mix, and the selling price. Samsung is a company that sells different products and has to apply the concept of sales mix has to be applied in CVP analysis (Lee & Cheng, 2016). In using the sales mix, the company has to ensure that each item has the same ratio within the contribution margin. The contribution margin is arrived at by deriving the difference between the total sales and the variable costs.
Samsung recorded profits of KRW 242,452 which proves that the business is doing well. The break-even analysis has also been used by the firm to ensure they can come up with a model that sustains their profit margins into the future (KONDRATOVA & UMRIKHINA, 2014). Variable costs such as service costs which stood at KRW 585,101 in 2017 are included in calculating the break-even point. Samsung states that their manufacturing cost stands at $236 for each unit with $149 being absorbed into the business to be used in manufacturing accompanying devices.

CVP analysis has helped the company in different functions such as setting the best prices as well as the number of units that would have to be sold to support the company in surpassing their revenue targets.
References
KONDRATOVA, S. V., & UMRIKHINA, M. V. (2014). CVP ANALYSIS AS A TOOL FOR EFFECTIVE COMPANY MANAGEMENT IN THE NEW ECONOMY. Economic Analysis, (34), 28-35.
Lee, M., & Cheng, J. (2016, January 28). Samsung Earnings Slow Sharply in Fourth Quarter. Wall Street Journal – Online Edition. p. 1.