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✅ ..also known as (CVP) in short.
✅ ..a tool used by businesses to understand the relationships between their costs, volume of production, and profits.
✅ ..a financial modeling technique that helps businesses make decisions about pricing, product mix, and cost control.
✅ ..calculating the break-even point, which is the point at which a business’s revenue equals its total costs.
✅ ..both “fixed costs” i.e. the costs that do not vary with the volume of production AND “variable costs” i.e. the costs that vary with the volume of production.
✅ ..determine how changes in sales volume, prices, or costs will impact the business’s profitability after the break-even point has been calculated.
✅ ..a business can use CVP analysis to determine how many units it basically needs to sell in order to earn a profit, or how much it needs to increase its prices to achieve a certain level of profit.
CVP analysis is essentially useful..
✅ ..for businesses of all sizes and industries, as it helps businesses make informed decisions about their pricing, cost control, and overall profitability.
✅ ..the relationships between costs, volume of production, and profits, businesses can make better decisions about their operations and improve their financial performance.