Cost-volume-profit analysis (CVP) Benefits for the company's Growth

Cost-volume-profit analysis (CVP) is used to calculate how the changes in volume and costs impact a company's net income and operating income. CVP is one of the effective tool which helps accountants to make decision regarding future operation.

Benefits of CVP

• Helps to analyze which services and products are profitable and how can business use these services and products to get the maximum sum of revenue.
• Explains what sales volume will be necessary by the business in order to reach a fixed level of profits.
• Tells how much revenue should the business target to avoid losses occur.
• Highlights what would be expected budget of the business.
• Helps todetermine business’s fixed costs and measure the amount of risk related with any investment.
• Operating Leverage
• Income Tax Benefits
• Future Forecasting
• Helps to prepare budgets
• Helps to control cost
• Helps in products or services Price Determination
• Helps in profit planning.