CVP analysis can be used to help managers assess the risk associated with a business venture by comparing breakeven point to sales forecasted.

Question

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CVP (Cost-Volume-Profit) analysis helps managers understand the relationship between cost, volume, and profit, allowing them to assess the risk by comparing the breakeven point (the point at which total costs equal total revenue) to forecasted sales, thereby evaluating if the venture can cover costs and generate profit.

CVP Analysis Can Be Used to Help Managers Assess the Risk