Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin.
The Cost-Volume-Profit (CVP) analysis helps management in finding out the relationship of costs and revenues to output.
The aim of an undertaking is to earn profit. Profit depends upon a large number of factors, the most important of which are the cost of manufacture, selling price, and the volume of sales effected.
The three factors cost, volume and profit are interdependent—profit depends upon sales, selling price to a large extent depends upon cost, volume of sales depends upon the volume of production which, in turn, is related to costs. Cost, again, is the resultant of the operation of a number of varying factors.
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Explanation:
Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin.
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Answer:
The Cost-Volume-Profit (CVP) analysis helps management in finding out the relationship of costs and revenues to output.
The aim of an undertaking is to earn profit. Profit depends upon a large number of factors, the most important of which are the cost of manufacture, selling price, and the volume of sales effected.
The three factors cost, volume and profit are interdependent—profit depends upon sales, selling price to a large extent depends upon cost, volume of sales depends upon the volume of production which, in turn, is related to costs. Cost, again, is the resultant of the operation of a number of varying factors.
Factors Affecting Cost-Volume-Profit Analysis:
Such factors affecting cost are:
(i) Volume of production,
(ii) Product mix,
Explanation:
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