CVP analysis and limiting factors

Question 1

What is CVP analysis?

Answer 1

It examines the relationship between costs, sales and profit and allows the business to predict final outcomes based on changes in sales volume, costs or prices

Question 2

What are curvilinear CVP relationships?

Answer 2

Economic interpretation of CVP. Revenue and costs are non-linear relationships. Real-world cost behaviour is complex

Question 3

What is linear CVP relationships?

Answer 3

It assumes costs and revenue are linear within relevant range. It is used for accounting decision making.