Cost volume profit analysis (CVP analysis) is one of the most powerful tools that managers have at their command. It helps them understand the interrelationship
between cost, volume, and profit in an organization by focusing on interactions
among elements, like level or volume
of
activity, unit selling prices, variable
cost
per unit, total fixed costs, sales mix.
It is a powerful tool which furnishes the complete picture of the profit structure
and helps in planning of profits as helps managers understand the
interrelationships among cost, volume, and profit it is a vital tool in many business decisions.