# ECONOMICS

## COST ACCOUNTING

### COST VOLUME PROFIT ANALYSIS

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Cost volume profit analysis can be used to determine the effects of reduced selling prices on break-even points, Increased fixed costs on break-even points, and reduced variable costs on break-even points.
 A TRUE B FALSE
Explanation:

Detailed explanation-1: -Answer and Explanation: The statement is true. CVP analysis uses all the components mentioned to calculate the break-even point, and as a result, will also be able to predict the break-even point when any or all of those change in whichever direction.

Detailed explanation-2: -Cost Volume Profit (CVP) Analysis, also known as break-even analysis, is a financial planning tool that leaders use when determining short-term strategies for their business. This conveys to business decision-makers the effects of changes in selling price, costs, and volume on profits (in the short term).

Detailed explanation-3: -cost-volume-profit (CVP) analysis, helps managers predict how changes in costs and sales levels affect profit. In its basic form, CVP analysis involves computing the sales level at which a company neither earns an income nor incurs a loss, called the break-even point.

Detailed explanation-4: -Sensitivity analysis shows how the CVP model will change with changes in any of its variables (fixed costs, variable costs, sales price, or sales mix). The focus is typically on how changes in variables will affect profit.

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