what are the uses of CVP analysis
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A CVP analysis is used to determine the sales volume required to achieve a specified profit level. Therefore, the analysis reveals the break-even point where the sales volume yields a net operating income of zero and the sales cutoff amount that generates the first dollar of profit.
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Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there are several assumptions made, including: Sales price per unit is constant.
The cost-volume profit analysis requires three vital elements to make an accurate result. Those elements are activity level, variable cost per unit, and the total fixed cost.
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