An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:
A) Target income analysis.
B) Cost-volume-profit analysis.
C) Least-squares regression of costs.
D) Variance analysis.
E) Process costing.

Question

Quizplus · Accepted Answer

Cost-volume-profit analysis helps in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received. It involves analyzing the relationship between sales revenue, costs, and profits, and how they change with changes in volume or level of activity. Target income analysis is a part of cost-volume-profit analysis and is used to determine the level of sales required to achieve a specific target income. Least-squares regression of costs is a statistical technique used to estimate the relationship between costs and activity levels, but it may not be as useful in predicting future performance. Variance analysis is a technique used to analyze the difference between actual and budgeted results. Process costing is a method used to determine the cost of producing a large number of identical or similar products.

An Important Tool in Predicting the Volume of Activity, the Costs