CVP analysis enables decision makers to assess how much volume they need to avoid a loss or to maintain a certain margin of safety.

Question

Quizplus · Accepted Answer

This statement is true. CVP analysis helps decision makers to determine the level of sales volume needed to cover all the costs and generate a specific level of profit. It also helps them to identify the breakeven point and the margin of safety, which indicates the cushion between actual sales and the breakeven point.

CVP Analysis Enables Decision Makers to Assess How Much Volume