Cost volume profit analysis

 Cost volume profot analysis is a technique of cost accounting that is used to know the impact of changing level of cost and volume on the profit. It shows the relationship among cost, volume, and profit of the organization.

There are many factors of Cost Vollume Prifit analysis. These factors are 

1.Cost of volume of product.

2.Volume of product which are peoduced  and sold.

3.Profit earned by organization,

We know that there are many factors of production. These factors are corelated to one another, When the cost of one factoe changes the cost of production of other factor also changes.With the help of Cost Volume Profit analysis we study the effect of change in one factor on the other factor.

It is a popular technique that is used by large scale company, Multinational company for profit planning.It also shows the effect on future profit with change in fixed cost,variable cost.It is also very useful in decision making,

Objectives-

1.To forcast accurate profit of organization.

2.It helps us to make Flexible budget of organization.

3.To fix the price of product.

4.To measure the performance of organization.

5.To know the amount of overhead.

6.To proper pfofit planning.

7.To make organization effective, efficient, and economical.

8.To control cost.

9.To proper production planning,

10.To acieve target profit of organization.

Application-

1.Profit planning decision.

2.Product planning decision.

3.To calculate the relationshiop between sales volume and revenue.

4.To identify minimum production of organization to avoid loss.

5.To take appeopriate decision towards Priduction Pricing.

Assumption-

1.It may not care other factor of cost like inflation, political and economical.

2.The division of all cost in two parts fix amd variable is easily.

3.Total fix cost does not remain constant at every renge of production.

4.It assumes selling price is constant.

5.It does not care inventory.