Cost Volume Profit Analysis

[cschleyer]

Does anybody know who is directly affected by the use of Cost Volume Profit Analysis?

I know that CVP is a break-even point and a limitation of CVP can occur since the estimates are for the future, and they are not guaranteed. This means that the CVP analysis may not stay accurate. Also, since the numbers are estimated, they may be easily changed and therefore companies are capable of deceiving. Or even skewing their bottom line.

Does anybody know who is directly affected by the use of Cost Volume Profit Analysis? Would anybody be able to help me out with this?

 

[BoomerD]

http://www.principlesofaccounting.com/chapter%2018.htm

"COST-VOLUME-PROFIT (CVP): CVP analysis is imperative for management. It is used to build an understanding of the relationship between costs, business volume, and profitability. The analysis focuses on the interplay of pricing, volume, variable and fixed costs, and product mix. This analysis will drive decisions about what products to offer, how to price them, and how to manage an organization's cost structure. CVP is at the heart of techniques that are useful for calculating the break-even point, volume levels necessary to achieve targeted income levels, and similar computations. The starting point for these calculations is to consider the contribution margin."