what is social responsibility?
College of Administration and Finance Sciences SEU ELITE what is social responsibility? Is about doing good for others and the environment What is CVP? Cost-Volume-Profit analysis is a tool that businesses use to understand the relationship between costs, sales volume, and profits, which assists them in making better decisions to maximize profitability. The relationship between them Businesses can gain a better understanding of costs, volume, and profitability through CVP analysis. Profitability and societal welfare are aligned with sustainability and accountability when social responsibility is integrated Social Responsibility Integration: Incorporating social responsibility into Cost Volume Profit (CVP) analysis is essential for businesses to assess the broader impact of their operations. Transparency and Ethical Decision-Making: Integrating social responsibility promotes transparency and ethical decision-making, aligning business practices with stakeholders’ values. Cost Consideration: Factoring in the costs associated with social responsibility initiatives, such as environmental sustainability or fair labor practices, provides a comprehensive understanding of the true cost structure. Sustainable Business Growth By considering social responsibility alongside CVP analysis, businesses can foster sustainable growth while making a positive societal impact. The breakeven point The point where a business does not experience any losses or gains when total costs and total revenues are equal. The indifference point A cost indifference point is the point where the cost of both fixed and variable alternatives is equal. The margin of safety The margin of safety is a financial ratio that determines how much sales have exceeded the break-even point. Social responsibility can significantly impact Cost-Volume-Profit (CVP) analysis in both quantitative and qualitative ways, particularly in relation to customer behavior. Quantitatively, it can affect cost structures, revenues, and sales volumes. Qualitatively, it can enhance brand image, customer perception, and competitive advantage. Cost Accounting data A bakery that sells cupcakes. Here’s how the break-even point concept can be applied: • Fixed Costs: Rent, oven maintenance, salaries of bakers (assuming they are paid a fixed amount regardless of how many cupcakes are sold). • Variable Costs: Ingredients, cupcake liners, packaging (costs that change based on the number of cupcakes produced). • Selling Price: The price the bakery charges per cupcake. The break-even point will be the number of cupcakes the bakery needs to sell to cover all their expenses (fixed costs + variable costs per cupcake) and make no profit or loss. Cost Accounting data Let’s say: Break-Even Point (Units) = $1,000 / ($1.00 – $0.50) = $1,000 / $0.50 = 2,000 cupcakes • Fixed Costs = $1,000 per month • Variable Cost per Cupcake = $0.50 • Selling Price per Cupcake = $1.00 We can use the break-even point formula to find the number of cupcakes the bakery needs to sell to break even: Break-Even Point (Units) = Total Fixed Costs / (Selling Price per Unit – Variable Cost per Unit) In this example, the bakery needs to sell 2,000 cupcakes each month to cover their expenses and reach the break-even point. If they sell more than 2,000 cupcakes, they will start making a profit. If they sell less than 2,000 cupcakes, they will incur a loss Cost-Volume-Profit analysis is accompanied by interpretations and key considerations: • The balance between profit and social responsibility • The relationship between costs and social impact • Managing volume and social responsibility • Breakeven point and ethical limits • Safety margin and risk mitigation Profitability and sustainability Social responsibility can be affected by the cost-volumeprofit analysis in multiple ways: Environmental Impact Community Engagement Employee welfare Ethical pricing STC, is a telecom business in Saudi Arabia. The telecom provider in the nation is the biggest due to their market capitalization, overall revenue, and workforce size. Internet, digital television, landline, and mobile phone services are all part of STC’s comprehensive suite of telecommunications services. Since its establishment in 1998, the company has grown to become a significant player in the Middle Eastern telecom market. Conclusion Incorporating social responsibility into Cost-Volume-Profit (CVP) analysis allows businesses to balance profitability with ethical considerations like environmental impact, community engagement, and employee welfare. By integrating social responsibility into decision-making, businesses can achieve sustainable growth while fulfilling their obligations to society. This approach fosters transparency, ethical decision-making, and stakeholder engagement, ensuring long-term viability and ethical integrity. References Murphy, C. B. (2024, January 27). Why social responsibility matters to businesses. Investopedia. An introduction to cost volume profit analysis. (2024, March 1). Landingpage-v3. Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2017). Introduction to Management Accounting (16th ed.). Pearson. Eldenburg, L. G., & Wolcott, S. K. (2011). Cost Management: Measuring, Monitoring, and Motivating Performance. Wiley. our vision & value. (n.d.). https://www.stc.com.sa/content/stcgroupwebsite/sa/en/who-we-are/our-visionand-value.html
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