CVP analysis is a method of determining how changes in variable and fixed costs affect a company's profit. Companies can utilize CVP to figure out how many units they need to sell to break even or achieve a specific profit margin.
What are the four CVP analysis assumptions?
(I) Every expense can be broken down into fixed and variable components.
(ii) Costs and revenues behave linearly over the activity range under consideration.
(iii) Volume is the single element that influences expenses and income.
(iv) Technology, production processes, and efficiency are unaffected.
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