Cost Volume Profit Analysis refers to the analysis between cost and volume of sales to examine their effect on profit.
- It involves the formulation of policies and strategies regarding the revenue and cost of an organization.
- Profit is maximized with the decrease in cost and increase in revenue.
Importance of Cost Volume Profit Analysis:
- To forecast the profit by the analysis of cost and volume of sales.
- To calculate break even point.
- To help preparing flexible budget.
- To select the best alternative for maximizing profit.
- To help in making decision on manufacturing or buying.
