10.What is cost-volume-profit (CVP) analysis and how is it used in decision making?Cost-Volume-Profit (CVP) analysis is a method of cost accounting that looks at the impact that varying levels of costs and volume have on operating profit. The cost-volume-profit, also commonly known as break-even analysis, looks to determine the break-even point for different sales volumes and cost structure, which can be useful for managers making short-term economicdecisions.The cost-volume-profit analysis makes several assumptions, including that the sales price, fixes costs, variable cost per unit are constant. Running this analysis involves using several equations for price, cost and other variables, then plotting them out on an economic graph.The CVP formula can be used to calculate the sales volume needed to cover costs and break even, in the CVP breakeven sales volume formula, as follows:Breakeven Sales Volume = FC/CMFC = Fixed costsCM = Contribution margin = Sales - Variable costs11.Scenario: APC Bikes, a manufacturer of sturdy mountain bikes for intermediate-level bikers. Due to the increasing popularity of cross-country cycling, the management of APC Bikes wants to produce a new mountain bike. After discussions with the sales and production teams, management has forecast the following information:Price per bike$800Variable cost per bike$300Fixed costs related to bike production$5,500,000Targeted pre-tax profit$300,000Targeted post-tax profit$210,000Tax rate30%Required: Calculate breakeven in units and total revenue.Fixed costs-$5,500,000Contribution margin ($500) = sales ($800)-variable cost ($300)Breakeven sales volume ($11,000) = Fixed costs ($5,500,000) : Contribution margin ($500)11000*800=$8,800,0