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The Essentials of Finance and Accounting for Nonfinancial Managers, 3rd Edition by Edward Fields

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CHAPTER NINE

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Analysis of Business Profitability

The discussion in this chapter will focus on the factors that determine the profitability of individual products and help us to improve the decisions that we make concerning these products. We will measure and evaluate the factors that determine the profitability of a product, including:

  • Product price
  • Unit volume sold
  • Costs, both fixed and variable
  • Profitability

The financial tool used to achieve these goals is called breakeven analysis.

We begin our discussion by looking at the operating budget for Raritan Manufacturing Company, which is presented in Exhibit 9-1. Raritan has established revenue, ...

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