Use of Cost-Volume-Profit Analysis Technique in Customer Profitability Analysis and Model Suggestion for Businesses

Abstract

Cost-volume-profit (CVP) analysis, usually the relationship between volume and cost, is created to observe production and sales results. In the analysis of the volume and cost dimension, the profit dimension is considered as a result. However, the true point of view must be profit. Because the basic condition for the sustainability of an enterprise is "profit". The main element that makes profit is "customer". Business activities are being carried out with the profit from the customer. In fact, the size of the analysis also determines the size of the customer. For this reason, rather than trying to measure the profitability of the products to the business, the main purpose should be to determine the profitability of which customers of the business. The main purpose of this study is to identify the profit contribution of each customer through CVP analysis and to realize customer profitability analysis which will enable customer segmentation. The effect of CVP analysis on both product mix and product mix variability and customer-level profitability analysis are tested on a hypothetical data set. For this purpose, standard and new product mixes are created, the amount of the product sold at the customer level, the sales and the cost are distributed, and the customer profitability is determined with the help of the CVP analysis technique. As a result of the study, it is reached that the decision makers will be more meaningful to decide according to the customer-based profitability rather than the product-based profitability.