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Break-Even and Budgeting

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1. The break even or cost volume profit (CVP) model is based on a number of assumptions. Discuss these assumptions and whether or not they are correct in the real world. Finally, discuss how CVP analysis can be useful in planning.

2. Describe the advantages and disadvantages of budgeting

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Solution Summary

This solution discusses some the major assumptions made when using the cost volume profit model (CVP) and explains why they are not correct in the real world. Additionally, this article describes the advantages and drawbacks of budgeting.

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1. The break even or cost volume profit (CVP) model is based on a number of assumptions. Discuss these assumptions and whether or not they are correct in the real world. Finally, discuss how CVP analysis can be useful in planning.

Cost volume profit (CVP) analysis is a that model companies use to assess the impact of possible changes in the costs and volume on their operating profit and net profit with certain underlying assumptions. First, the CVP analysis assumes that all products and services are sold at the same price. This assumption can be considered correct in the real world because selling prices can change due to actions of competitors and inflation. This model also ...

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