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.

8. 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)

9. • Topic : Why CVP Analysis Significant for Business Organization

10. 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.

11. 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.

12. 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.

13. 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.