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Generally, CVP Analysis Provides Answers To Questions Such As

Fixed costs remain constant while marginal costs are completely variable according to changes in output volume. Selling prices and factor prices also remain constant at different sales volumes, as efficiency, productivity, and sales mix remain unchanged. Cost-volume-profit (CVP) analysis examines how changes in prices, costs, and sales volume impact profits, and can determine the minimum sales needed to avoid losses or identify the most profitable products.

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76 views1 page

Generally, CVP Analysis Provides Answers To Questions Such As

Fixed costs remain constant while marginal costs are completely variable according to changes in output volume. Selling prices and factor prices also remain constant at different sales volumes, as efficiency, productivity, and sales mix remain unchanged. Cost-volume-profit (CVP) analysis examines how changes in prices, costs, and sales volume impact profits, and can determine the minimum sales needed to avoid losses or identify the most profitable products.

Uploaded by

samuel debebe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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) Fixed and variable cost patterns can be established with reasonable

accuracy and that fixed costs remain static and marginal costs are
completely variable at all levels of output.
(ii) Selling prices are constant at all sales volumes.
(iii) Factor prices (e.g. material prices, wage rates) are constant at all
sales volumes.
(iv) Efficiency and productivity remain unchanged.
(v) In a multi product situation, there is constant sales mix at all levels
of sales.

(vi) Turnover level (volume) is the only relevant factor affecting costs
and revenue.

(vii) The volume of production equals the volume of sales.

Generally, CVP analysis provides answers to questions such


as:
(a) What will be the effect of changes in prices, costs, and volume on
profits?

(b) What minimum sales volume need be affected to avoid losses?

(c) Which product is the most profitable one and which product or
operation of a plant should be discontinued?

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