Effective use of the CVP (cost-volume-profit) model requires an understanding of all of the following concepts, except:

Question

Quizplus · Accepted Answer

The CVP model focuses on analyzing the relationship between sales, costs, and profits, so an understanding of variable and fixed costs and their behavior, contribution margin per unit and ratio, and the contribution income statement is essential. However, the total cost of goods sold (CGS) is just one component of total costs and is not necessarily relevant for analyzing the impact of changes in sales volume on profits, which is the main focus of the CVP model. Therefore, D is the correct answer.

Effective Use of the CVP (Cost-Volume-Profit) Model Requires an Understanding