Tiêu đề TOPIC 8 COST-VOLUME PROFIT ANALYSIS(BEP ANALYSIS).pdf ✅

d) Labour efficiency may change where improved training programs or a reduction in labour turn over is expected to occur e) Overhead expenses may fall due to more efficient placement of order with suppliers who offer best terms f) Product mix may change either as part of overall company strategy or due to increased competition Following are the three approaches to a CVP analysis: • Cost and revenue equations • Contribution margin • Profit graph Objectives of Cost-Volume-Profit Analysis a) In order to forecast profits accurately, it is essential to ascertain the relationship between cost and profit on one hand and volume on the other. b) Cost-volume-profit analysis is helpful in setting up flexible budget which c) Cost-volume-profit analysis assists in evaluating performance for the purpose of control thus enabling management to take corrective actions where necessary and in good time. d) Such analysis may assist management in formulating pricing policies by projecting the effect of different price structures on cost and profit. Assumptions and Terminology CVP is based on various assumptions as listed below: 1. Volume is the only factor affecting sales and expenses The changes in the level of various revenue and costs arise only because of the changes in the volume of output produced and sold, e.g., bales of flour produced by Unga Ltd. The number of output (units) to be sold is the only revenue and cost driver.