CVP analysis allows firms to evaluate the tradeoff between price and quantity, and their effect on profit.

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CVP analysis, or cost-volume-profit analysis, is a tool that helps firms understand the relationship between sales volume, costs, and profits, and how changes in these variables can impact the business. By analyzing the tradeoff between the price of goods or services and the quantity sold, managers can make informed decisions about pricing strategies, production levels, and other operational factors that affect profitability.

CVP Analysis Allows Firms to Evaluate the Tradeoff Between Price