CVP analysis :Concept, Objective, Assumption

CVP analysis :Concept, Objective, Assumption

1. Presentation On Management Accounting Presented To: Mrs. Fahmida Ahmed Assistant Professor Faculty of Business Administration Presented By: Name: Saimun Hossain Id No: 1587 Batch: 42nd Semester: 7th University Of Science & Technology Chittagong (USTC)

2. Topic: CVP analysis :Concept, Objective, Assumption

3. CVP Analysis concept The cost volume profit analysis, commonly referred to as CVP, is a planning process that management uses to predict the future volume of activity, costs incurred, sales made, and profits received. In other words, it’s a mathematical equation that computes how changes in costs and sales will affect income in future periods.

4. Objectives of CVP analysis Understand the interaction among Prices of products Volume or level of activity Per unit variable cost Total fixed cost Mix of product sold

5. Assumptions of CVP Analysis Expenses can be classified as either variable or fixed CVP relationships are linear over a wide range of production and sales Sales prices, unit variable cost, and total fixed expenses will not vary within the relevant range Volume is the only cost driver The relevant range of volume is specified Inventory levels will be unchanged The sales mix remains unchanged during the period

6. Conclusion CVP analysis are essential method that assists business managers to make appropriate long and short-term decisions. Therefore, managers frequently address CVP tool to generate effective economic planning tactics. This analysis method often applied to gain compromise of cost and volume terms of production. Compromise among cost, volume and profit can be achieved only when there is clear understanding of impact of variable, fixed costs and units of production.

7. Presentation On Management Accounting Presented To: Mrs. Fahmida Ahmed Assistant Professor Faculty of Business Administration Presented By: Name: Saimun Hossain Id No: 1587 Batch: 42nd Semester: 7th University Of Science & Technology Chittagong (USTC)

8. Topic : Why CVP Analysis Significant for Business Organization

9. Why cvp Analysis is significant for business organization CVP analysis plays a larger role in managerial accounting than in financing accounting. Managerial accounting focuses on helping managers or those tasked with running businesses make smart, cost-effective moves. Financial accounting, by contrast, focuses more on painting an economic picture of a company so that outside parties, such as banks or investors, can determine how financially healthy it is.

10. Break-even Break-even analysis tells you how many units of a product must be sold to cover the fixed and variable costs of production. The break-even point is considered a measure of the margin of safety. Break-even analysis is used broadly, from stock and options trading to corporate budgeting for various projects.

11. Profit Analysis Profit analysis involves dissecting the reported profit figure of a business to determine the actual extent of its profitability. This analysis is needed by outside analysts, because managers routinely report overly optimistic profit information to the outside world.

12. Conclusion Cost Volume Profit (CVP) Analysis is an important part of short term decision making in a business. Although CVP analysis is cannot get all information need but it help manager to make fast decision making. Event we know that there are many limitation and assumption must be make when do the decision making. The contribution margin is central to CVP Analysis. It is also the basis for determination of the break even point in a business.