Global Businesses have been experiencing serious challenges to their survival and sustainability in the post Covid-19 era. They have been aggressively competing on prices and costs in highly uncertain market conditions. In this context, CVP analysis has become a very critical tool for managers for decision making. Managers use CVP analysis for cost estimations and reductions, cost classifications into variable costs, fixed costs, and know how the increase or decrease in production levels affect selling prices and profits or loss at the excess or shortage of production levels. They need to know the break-even point and target profit at different production levels. The CVP analysis helps managers to launch a new product or produce more or less of a particular product, decide about their product mix and production and sales volumes.

Taking an existing Company as an example,

Critically discuss how can managers use CVP analysis for cost estimation and control?

Critically discuss how can managers use CVP analysis in pricing, profit-making and product mix decisions?

Critically discuss the basic assumptions of CVP analysis.

Answer rating: 100% (QA)

Cost Estimation and Control using CVP Analysis 1 Variable and Fixed Costs Breakdown CVP analysis helps managers categorize costs into variable costs eg raw materials direct labor and fixed costs eg re... View the full answer