Harmony Greens Golf Club barely achieved a level of sales volume last year that allowed it to break even. Management would like to determine how operating income would be affected by a 20% reduction in the daily golf fee it charges. The most appropriate form of analysis would be:
A) Incremental analysis.
B) Cost-volume-profit analysis.
C) Trend analysis.
D) Variance analysis.

Question

Quizplus · Accepted Answer

Cost-volume-profit (CVP) analysis is the most appropriate form of analysis for determining how changes in costs and volume affect a company's operating income. In this scenario, Harmony Greens Golf Club is considering a change in its pricing strategy (a 20% reduction in the daily golf fee), which directly impacts its sales volume and, consequently, its operating income. CVP analysis helps in understanding the relationship between cost, volume, and profit, making it the best tool for assessing the impact of the proposed fee reduction.

Harmony Greens Golf Club Barely Achieved a Level of Sales