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This post addresses CVP analysis and variable costing.

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(a) How does the competition play into the CVP analysis?

(b) what do you see as the downside to CVP Analysis?

(c) why do you think GAAP does not allow the variable costing model?

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The solution provides a detailed discussion explaining how the competition plays a role in CVP analysis, the downside to CVP analysis, and why GAAP does not allow the variable costing model.

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(a) How does the competition play into the CVP analysis?

-- CVP analysis gives management a very accurate number as to the company's breakeven point, which shows management exactly how much is needed for materials, supplies, and other expenses related to producing a certain number of goods, and that number starts with the breakeven point. By having such a fine-tuned analysis, management is able to increase labor for the optimal production quantity, and is able to refine other areas of spending. By doing so, there is a greater chance that the ...

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