Benefits of Cost Volume Profit Analysis
It helps to analyze which products and services are beneficial and how can company use these products and services to generate the maximum amount of revenue.
It explains what sales volume will be needed by the company to achieve a fixed level of profits.
It tells how much revenue the company should target to make sure that no losses occur.
It highlights what would be expected budget of the company.
It helps to calculate company’s fixed costs and measure the amount of risk associated with any investment.
All the above-mentioned benefits of Cost Volume Profit Analysis directly or indirectly related to the decision-making processes of a company. Any business organization must make a lot of decisions regarding their price, their costs, and products, fixed and variable unit costs and so on. The CVP approach simplifies this process by providing the companies with a breakeven point and by helping them to engage in better decision making and planning.
As newly appointed Chief Financial Officer (CFO), I would like Mr. Adrian to utilize the Cost Volume-Profit (CVP) Analysis Methodology within the company at its earliest convenience.
Will, K. (February 07, 2022). Cost-Volume-Profit (CVP) Analysis. Retrieved June 29, 2022, from https://www.investopedia.com/terms/c/cost-volume-profit-analysis.aspLinks to an external site.
Abey, F. (June 21, 2022). Cost-Volume-Profit (CVP) Analysis. Retrieved June 29, 2022, from https://www.mbaknol.com/category/financial-managem…