A planning tool that expresses the relationships among costs,volume,and prices and their effects on profits and losses is called ________.

Question

Quizplus · Accepted Answer

Cost-volume-profit (CVP) analysis is a planning tool that enables managers to determine the relationships among costs, volume, and prices and their effects on profits and losses. This analysis is used to identify the breakeven point, target profit levels, and the amount of sales required to achieve these goals. The analysis incorporates factors such as variable cost, fixed cost, contribution margin, and the margin of safety to provide a comprehensive picture of a company's financial health. Option B, target profit analysis, is a specific application of CVP analysis used to determine the amount of sales required to achieve a desired profit level. Options C and D are closely related to CVP analysis but do not provide as comprehensive an analysis of a company's financial position. Contribution margin ratio analysis focuses on the contribution margin as a percentage of sales, while breakeven point analysis only determines the level of sales required to cover a company's fixed costs.

A Planning Tool That Expresses the Relationships Among Costs,volume,and Prices