Cost-volume-profit analysis is not appropriate for service businesses.

Question

Quizplus · Accepted Answer

Cost-volume-profit analysis can be used for service businesses, although it may require some adaptations compared to manufacturing businesses. For example, instead of calculating unit costs, service businesses may need to calculate the cost per hour of service or the cost per customer. Additionally, the relationship between sales volume and costs may not be as straightforward for service businesses, since many costs are fixed regardless of the number of customers served. However, cost-volume-profit analysis can still be a useful tool for understanding the profitability of service businesses and making decisions about pricing, cost control, and capacity utilization.

Cost-Volume-Profit Analysis Is Not Appropriate for Service Businesses