Q20-12RQ - Horngren'S Financial And Managerial Accounting

Question

What is cost-volume-profit analysis?

 

Step-by-Step Solution

Answer

Answer

 

A tool that explains the relationship between cost, volume and prices are known as cost-volume-profit analysis.

 

Step 1: Meaning of cost-volume-profit analysis

A tool that explains the relationship between cost, volume, and prices is known as cost-volume-profit analysis. Also, it expresses their effects on profit and losses.

Step 2: Breakeven point of CVP analysis

Break-even point refers to the point where business entity is neither at loss or nor at profit. At this point total cost equal to total turnover.