Friday, February 12, 2010

Objectives of Cost-Volume-Profit Analysis

1. In order to forecast profits accurately, it is essential to ascertain the relationship between cost and profit on one hand and volume on the other.

2. Cost-volume-profit analysis is helpful in setting up flexible budget which indicates cost at various levels of activities.

3. Cost-volume-profit analysis assist in evaluating performance for the purpose of control.

4. Such analysis may assist management in formulating pricing policies by projecting the effect of different price structures on cost and profit.

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