Managers and upper management use the Cost-Volume-Profit (CVP) to determine the

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Managers and upper management use the Cost-Volume-Profit (CVP) to determine the breakeven point for the different sales volumes and cost structures. The CVP can only be performed if the sales price, fixed and variable costs per unit are constant. CVP Analysis helps the business determine how much they need to sell to break even, i.e., no profit or loss. CVP Analysis is a critical accounting management tool. It emphasizes sales volume because, in the short run, most of the estimates, such as sales price, the cost of materials, and Salaries, can be estimated with reasonable accuracy. (Srivastav, 2018)The formula that is used to calculate the CVP is the following.Breakeven sales volume = Fixed costs divided by Contribution margin.The contribution margin is the result of the Sales minus Variable costs. This formula is used to determine the company’s target sales volume. In order to get an accurate result, we have to add the target profit amount per unit to the fixed cost of the formula above. The goal is that the contribution margin must exceed total fixed costs in order to make a profit, but there is a catch. There is a limitation of CVP where fixed cost must be constant, but in reality, it is not always the case because the fixed cost could change due to various and unforeseen circumstances such as the costs of raw materials, transportation, current market, and so on. Cost volume profit analysis assumes costs are either fixed or variable; however, some are semi-fixed. For instance, telecommunication or voice expenses comprise fixed monthly and variable charges based on the number of calls made. (Kenton, 2010)Reference ListEgan, B. (no date) “Chapter 15 – cost-volume profit (CVP) analysis and break-even point,” in Introduction to Food Production and Service. Affordable Course Transformation: The Pennsylvania State University.I need a discussion reply for this postKenton, W. (2010) Cost-volume-profit (CVP) analysis: What it is and the formula for calculating it, Investopedia. Available at: https://www.investopedia.com/terms/c/cost-volume-profit-analysis.asp (Accessed: November 27, 2022).Srivastav, A. K. (2018) Cost Volume Profit Analysis, WallStreetMojo. Available at: https://www.wallstreetmojo.com/cost-volume-profit-analysis/ (Accessed: November 27, 2022).

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