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    Profit Cost Volume Relationship

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    selva kumar
    The document discusses cost-volume-profit (CVP) analysis, which is an important tool in management accounting that assists with internal decision making like budgeting and external forecasting for investors. CVP analysis examines the relationship between costs, sales, production volume, and profits. It provides a model to understand how operating profit changes with the number of units sold. CVP analysis is crucial for profit planning and assessing business performance under uncertain market conditions. It helps management evaluate alternatives and forecast profits based on sales projections.

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    Profit Cost Volume Relationship

    Uploaded by

    selva kumar
    33 views3 pages
    The document discusses cost-volume-profit (CVP) analysis, which is an important tool in management accounting that assists with internal decision making like budgeting and external forecasting for investors. CVP analysis examines the relationship between costs, sales, production volume, and profits. It provides a model to understand how operating profit changes with the number of units sold. CVP analysis is crucial for profit planning and assessing business performance under uncertain market conditions. It helps management evaluate alternatives and forecast profits based on sales projections.

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    profit and cost volume relationship and related numericals

    Original Title

    Profit cost volume relationship

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    The document discusses cost-volume-profit (CVP) analysis, which is an important tool in management accounting that assists with internal decision making like budgeting and external forecasting for investors. CVP analysis examines the relationship between costs, sales, production volume, and profits. It provides a model to understand how operating profit changes with the number of units sold. CVP analysis is crucial for profit planning and assessing business performance under uncertain market conditions. It helps management evaluate alternatives and forecast profits based on sales projections.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    33 views3 pages

    Profit Cost Volume Relationship

    Uploaded by

    selva kumar
    The document discusses cost-volume-profit (CVP) analysis, which is an important tool in management accounting that assists with internal decision making like budgeting and external forecasting for investors. CVP analysis examines the relationship between costs, sales, production volume, and profits. It provides a model to understand how operating profit changes with the number of units sold. CVP analysis is crucial for profit planning and assessing business performance under uncertain market conditions. It helps management evaluate alternatives and forecast profits based on sales projections.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
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    1

    Profit-Cost-Volume Relationship

    Cost-volume-profit (CVP ) Adenji (2008) analysis is one of the most broadly used tools in

    management accounting, which assists multiple purposes both internally (such as deciding

    alternative sales outlines, budgeting, and performance evaluation) and externally (such as

    earnings forecasts conditional on sales forecasts by investors and analysts). The (CVP)

    relationship is based on the standard model of fixed and variable costs, which means a linear

    relationship between sales and costs, and for, between sales and earnings.

    In The Uncertainty Conditions Cost-Volume-Profit Analysis

    Uncertainty in the markets and global instability are pushing companies to plan for the future

    and act quickly. Profit planning plays an important role in fulfilling their primary goal of

    making a profit". Profit planning requires determining the factors affecting the benefits and

    the coordination between them. Cost-Volume-Benefit, Analysis (CVP), aims to determine the

    effects of the factors required for for-profit planning on profit. Cost-volume-Profit, analysis is

    an analysis that companies use in the decision-making process.

    Cost-Volume-Profit Analysis in decision making

    The cost-volume-profit is a necessary tool for planning also for management control. The

    method includes several techniques and problem-solving methods based on understanding

    patterns of changing business cost characteristics. The techniques express the relationship

    between revenue, sales structure, costs, production volume, and profits, and include break-

    even analysis and profit forecasting processes. This relationship provides a general model of

    economic activity, which management can use for short-term forecasting to assess business

    performance and analyze decision alternatives. The marginal contribution is the difference

    between total revenue and total variable costs and explains how operating profit changes

    depending on the number of units sold.


    2

    Why is Profit-cost-volume important in planning?

    To be successful in the global competitive environment, business is required to maintain their

    activities and plan. Profit planning is the most important management tool since the main

    target to make a profit. The cost system, which is used, should provide information for the

    concerning people about the aspects, such as unproductive parts, profitless products, and

    determining the activities and products whose expenses are high, but incomes are very low.

    Activity-based costing is becoming a tool helping business management by supplying more

    detailed information as well as an effort to determine more accurately the product costs.

    However, activity-based costing is examined because it is found complex and application is

    difficult.
    3

    REFERENCES

    Kirlioğlu, H., & Baral, G. (2012). In The Uncertainty Conditions Cost-Volume-Profit Anlysis Which is
    Used Fuzzy Logic. In International Symposium on Sustainable Development, winter.

    Magee, R. P. (1975). Cost-volume-profit analysis, uncertainty and capital market equilibrium. Journal
    of Accounting Research, 257-266.

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