Final answer:
Trigger words for Cost, Volume, Profit analysis often include terms like accounting profit, average profit, and average total cost. These concepts help determine a company's profitability by comparing total revenue with total costs and understanding the average cost curves as they relate to production decisions.
Step-by-step explanation:
Trigger words and sentences for Cost, Volume, Profit (CVP) analysis in a case often involve inquiries into how changes in costs and sales volume affect a company's profit. Key terms associated with CVP analysis include accounting profit, which is total revenues minus explicit costs such as depreciation; average profit or profit margin, which is the profit divided by the quantity of output produced; average total cost, the total cost divided by the quantity of output; and average variable cost, which is the variable cost divided by the quantity of output. Understanding these concepts is crucial when you seek to calculate profits by comparing total revenue and total cost, identify profits and losses with the average cost curve, explain the shutdown point, or determine the price at which a firm should continue producing in the short run.
To apply these concepts to a practical scenario, you would start by calculating the explicit costs of a business, like office rental and employee salaries. Next, you'd subtract these explicit costs from the revenues to determine the accounting profit. For instance, if revenues are $200,000 and explicit costs are $85,000, the accounting profit would be $115,000.