Cost-volume-profit analysis is not appropriate for service businesses,as they do not have any direct manufacturing costs.

Question

Quizplus · Accepted Answer

While service businesses may not have direct manufacturing costs, they still have variable costs and fixed costs that can be analyzed through cost-volume-profit analysis. Examples of variable costs for a service business could include labor costs, equipment rental fees, or raw materials for producing goods. Examples of fixed costs could include rent, insurance, and salaries for management staff. Cost-volume-profit analysis can be useful in decision-making for service businesses in terms of pricing strategies, break-even points, and profit margins.

Cost-Volume-Profit Analysis Is Not Appropriate for Service Businesses,as They Do