Step 1 Cost volume profit analysis determines the size of business needed

1. Determine the expected size of the business in term of costs volume and price of the product.  
2. Profit planning could be estimated by adopting the same model.
3. The relationship between fixed and variable costs
4. Is the volume and price meet the requirement of the target market?
5. Can you convert fixed costs into variable?
6. Can some of these costs be outsourced?
7. This model could be simulated with changes in the variables such as price or costs or volume.
8. The formula:  Fixed Costs/Contribution margin = units

• or Fixed costs/Contribution margin ratio.= sales value.