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Factors in a cost volume profit analysis

Factors which should be taken into account when making decisions about price, such as any change in risk involved in the cost-volume-profit structure; the link between short- and long-run prices; and the interactions between acquisitions policy, financing decisions and pricing decisions.

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There are other factors which must be considered also, in addition to the factors that have been mentioned. Economic conditions are also a consideration. The CVP makes many assumptions and therefore is not ideal to be used as a stand-alone model for decision-making, including decisions about price. Management needs to take the general economic conditions into consideration when dealing with prices. If the economy has been stable, this would be an important ...

Solution Summary

The solution discusses factors that should be taken into account when making decisions about price, such as any change in risk involved in the cost-volume-profit structure; the link between short- and long-run prices; and the interactions between acquisitions policy, financing decisions and pricing decisions.

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