5

Cost-Volume-Profit Analysis

“Not all costs may lead to reduction in profit for the firm.”

 

Anonymous

LEARNING OBJECTIVES

After reading the chapter, you will be able to:

  1. Understand the concept of cost-volume-profit analysis, its rationale, elements and importance.

  2. Analyse the elements of cost-volume-profit (CVP) analysis and understand the assumptions underlying CVP analysis and its various tools.

  3. Discuss the breakeven point, its concept, rationale and application.

  4. Understand the concept of contribution margin and look at its calculation and application.

  5. Discuss the various managerial decision applications of CVP analyses.

FINANCE IN PRACTICE

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