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CVP analysis help managers to take better decision. Justify with real life scenario

CVP analysis help managers to take better decision. Justify with real life scenario

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CVP analysis

CVP analysis help managers to take better decision. Justify with real life scenario is a method of cost accounting that examines the impact of various levels of costs and volume on operating profit. Cost-volume-profit analysis also known as break-even analysis helps to determine break-even points for different sales quantities, cost structures, which is very helpful for short-term financial decisions.


Cost-volume-profit analysis involves a number of assumptions, including selling price, fixed cost, and variable cost per unit. Implementing this analysis involves using several equations for price, price, and other variables and plotting them in a financial graph.

CVP analysis help to sole some real life scenario which is mentioned below

  • target sales volume
  • profit planning
  • product planning
  • make or buying decisions
  • whether to expand or contract a product
  • analysis of production capacity
  • budgetary control and analysis
  • pricing decision
  • analysis of acost behaviour and profit pattern
  • variable costing
  • comparison of actual with budjeted datas etc
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