Cost-volume-profit analysis is used PRIMARILY by management:
A)as a planning tool.
B)for control purposes.
C)to establish a target net income for next year.
D)to attain extremely accurate financial results.

Question

Quizplus · Accepted Answer

Cost-volume-profit (CVP) analysis is primarily used as a planning tool by management. It helps management to make decisions related to pricing, cost control, production capacity, and sales volume by analyzing the relationships between costs, revenues, and profits. While it can also be used for control purposes and to establish target net income, its primary purpose is to provide insight and guidance in the planning process. While CVP analysis can provide accurate financial results, it is not typically used for extremely precise or detailed analysis.

Cost-Volume-Profit Analysis Is Used PRIMARILY by Management