Explore BrainMass
Share

Explore BrainMass

    Cost volume profit / absorption and variable costing

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I need help getting those two questions answered at least 250 words each. Thanks

    1- For what is cost-volume-profit (CVP) analysis used? What are some of the key underlying assumptions that make CVP analysis useful for decision makers? Why might decision makers use CVP analysis?

    2- What are the differences between variable and absorption costing? Why is variable costing not allowed for GAAP reporting? Which method is more useful for internal decision-making? Why? As a manager, which would you prefer? Why?

    © BrainMass Inc. brainmass.com October 9, 2019, 11:50 pm ad1c9bdddf
    https://brainmass.com/business/financial-accounting-bookkeeping/cost-volume-profit-absorption-and-variable-costing-269469

    Solution Preview

    1- For what is cost-volume-profit (CVP) analysis used? What are some of the key underlying assumptions that make CVP analysis useful for decision makers? Why might decision makers use CVP analysis?

    Cost volume profit analysis is used for short term decision making. The cost volume profit analysis shows the impact on operating profit for a given change in either variable cost per unit, selling price per unit or fixed costs. Short term decisions, like evaluating the impact on income of a change in advertising expense or putting up a selling outlet in a fair and so to find the breakeven units or launch a new variant of existing products to cater to some specific event say currently U.S. Open in on and we may launch some clothes for this event. All these type of decisions which are for the short term are evaluated using cost volume profit analysis.
    The key assumptions ...

    Solution Summary

    The solution explains cost volume profit, absorption costing and variable costing

    $2.19