CVP
stands for Cost, Volume and Profit. CVP
analysis is a a powerful tool that helps managers understand the relationships
among cost, volume, and profit. CVP analysis focuses on how profits are
affected by the following five factors:
1.
Selling prices.
2.
Sales volume.
3.
Unit variable costs.
4.
Total fixed costs.
5.
Mix of products sold.
Because
CVP analysis helps managers understand how profits are affected by these key
factors, it is a vital tool in many business decisions.
