Cost-volume-profit analysis, or CVP, is something companies use to figure out how changes in costs and volume affect their operating expenses and net income. In other words, CVP is a methodical analysis of the dynamic inter-relationship between selling prices, sales and production volume, cost expenses, and profits.
Respond to the following in a minimum of 150 words:
- Explain each of the three elements of CVP analysis.
- Discuss how managers use CVP analysis.