Table of contents Page
Executive Summary 2
1.0 Cost, what is it? 3
1.1 Why allocate costs? 3
2.0 Cost-volume-profit (CVP) analysis 4
2.1 Advantages of CVP 4
2.2 Disadvantages of CVP 5
3.0 Background of Maersk Crewing Ltd. (Navy Merchant) 6
4.0 Model 1: Cost-Volume-Profit: Break-even point; Cost structure; Target sales 7
Question 1 8
Question 2 9
Question 3 10
Question 4 11
Question 5 12
Question 6 13
5.0 Sensitivity Analysis 14
6.0 Conclusion 15

Executive Summary
Costs defined as the price paid for acquiring, producing, and accomplishing most things. Allocation of costs is important because it does both better economic decisions and a higher level of managerial motivation outcomes for the company. Cost-volume-profit analysis otherwise known as CVP analysis is a tool for managers to calculate costs and forecast the net income through variables. Maersk one of the largest shipping and oil companies in the world. Model 1 questions and sensitivity analysis of Variable costs (labor costs) and number of transported goods, and how they affect the net income. 
1.0 Cost, what is it?
Cost as defined by Oxford dictionary is the price paid to acquire, produce, accomplish, or maintain anything like machines. In accounting terms, costs refer to the monetary value of expenditures for raw materials, equipment such as machines, shipping vessels, labor, and products. It is then recorded in bookkeeping for computation purposes to estimate the profits or losses from a particular venture to the yearly report (Snyder and Davenport, 1997, pp. 205-214). Cost is especially important to organizations when faced with a highly competitive environment where major companies try to outwit each other trading punches with one another by seeing which is the more effective, more efficient and holds higher shares in the market. Airlines...