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5. Briefly describe the cost-volume-profit analysis model and discuss how it can be used. Also, briefly explain the limitation of basic cost-volume-profit analysis as it relates to an organization’s sales mix.

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Casey Durgan
Casey DurganLv2
28 Sep 2019

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Cost-volume-profit (CVP)

posted Nov 28, 2016, 4:07 AM

Cost-volume-profit (CVP) analysis is a key step in manydecisions. CVP analysis involves specifying a model of therelations among the prices of products, the volume or level ofactivity, unit variable costs, total fixed costs, and the salesmix. This model is used to predict the impact on profits of changesin those parameters. Explain how changes in activity affectcontribution margin and net operating income.

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