Describe in detail how cost-value-profit assumptions are utilized in o
QUESTION
Describe in detail how cost-value-profit assumptions are utilized in organizations and give some specific examples from your reading.
Cost Volume profit (CVP) analysis is based on the assumptions that all costs can be segregated as fixed and variable costs, sale price and variable cost per unit and total fixed costs remain constant and all the units produced are sold off. These assumptions are used by the management in decision making in many areas where break even analysis is to be done or where¦
target sales or profit level has to be identified. Areas in which CVP analysis is used are decisions regarding making or buying a product, whether to shutdown or continue the operations, whether to expand or not and to process further or not.
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