CVP Analysis: An Important Chapter of Cost Accounting
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What is CVP Analysis?
CVP stands for Cost Volume Profit. It comes under Managerial Economics. It is defined as the point where the total revenue equals total cost. At this juncture, any particular company faces no loss or no income. You need to understand the various component of CVP and various assumptions that are assumed under CVP.
You may note that following are the components of Cost Volume Price Analysis:-
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Assumptions assumed in cost volume price analysis are mentioned below –
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Application and Limitation of CVP Analysis
CVP analysis is quite helpful and it simplifies calculations. It helps in simple calculations of target income sales. Due to this reason, it has gained importance in accounts and its demand is increasing day by day. It is quite effective while taking operational decisions. However, it has some limitations too.
Cost volume price analysis is short run and a marginal analysis. Therefore, it becomes difficult to analyze the life-cycle of a product. In order to get long term analysis of any product, accountants generally prefer to use throughput accounting or activity based costing. A lot of details is available with our experts who are providing 24×7 online support to students studying cost accounting. So, you may like to get CVP analysis homework help from them.
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