Illustrate the Environmental Analysis Process

question 12

Short Answer

Illustrate the environmental analysis process.

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Definitions:

Variable Expenses

Expenses that vary directly with the level of production or sales, such as raw materials and direct labor costs.

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, including rent, salaries, and insurance premiums.

Contribution Margin Ratio

A financial metric that indicates the portion of sales revenue that exceeds variable costs, expressed as a percentage of total sales.

Fixed Expenses

Fixed expenses are costs that do not change with the volume of output, such as rent or salaries, providing stability in financial planning but requiring effective budget management.