**Managerial Accounting for Decision-Making: A Comprehensive Case Study**

*Introduction:*

Managerial accounting plays a pivotal role in aiding organizations in decision-making processes. This case study explores how XYZ Company utilizes managerial accounting to make strategic decisions.

**Scenario: XYZ Company's Expansion Decision**

XYZ Company, a manufacturer of electronic devices, is considering expanding its product line to meet growing market demands. The management is assessing the financial viability of introducing a new product line, taking into account various factors.

**Step 1: Cost-Volume-Profit (CVP) Analysis**

XYZ Company begins with a thorough Cost-Volume-Profit (CVP) analysis. This involves estimating the fixed and variable costs associated with the new product line, determining the break-even point, and assessing the impact on overall profitability.

**Step 2: Incremental Analysis**

The management conducts incremental analysis to evaluate the additional costs and revenues associated with the new product line. This includes considering incremental revenues, variable costs, and any additional fixed costs required for production.

**Step 3: Relevant Cost Analysis**

A relevant cost analysis is performed to identify and consider only the costs and revenues that are relevant to the decision. This helps in eliminating irrelevant information and focusing on the factors that directly impact the decision to expand the product line.

**Step 4: Capital Budgeting Techniques**

To assess the long-term impact, XYZ Company utilizes capital budgeting techniques like Net Present Value (NPV) and Internal Rate of Return (IRR). These tools help in evaluating the financial viability of the expansion project over its entire life cycle.

**Step 5: Risk Assessment and Sensitivity Analysis**

Recognizing the uncertainties associated with business decisions, XYZ Company conducts risk assessment and sensitivity analysis. This involves considering various scenarios and assessing how changes in key variables (such as sales volume or costs) may impact the decision.

**Objective Type Question:**

**What is the primary purpose of conducting a Cost-Volume-Profit (CVP) analysis in the decision-making process for XYZ Company's potential expansion?**

A) To assess the long-term impact B) To identify and consider only relevant costs C) To estimate the break-even point and profitability D) To evaluate additional costs and revenues

Please choose the correct option (A, B, C, or D) based on the information provided in the case study.