CVP assumption
Cost Volume Profit Analysis:
Its Assumptions and Their Pitfalls
By Duncan Williamson Introduction The importance of identifying and criticising the underlying assumptions of cost volume profit analysis (CVP analysis) rests on the practical application of it: anyone who has ever tried (or anyone who may wish) to apply CVP analysis in reality, whilst trying to apply the substance of CVP theory will have found severe difficulties. These notes will help you solve those problems.
Rendesia e identifikimit dhe kriticizmit te shtreses se supozimeve te Analizes Kosto Vellim Fitimit (CVP analysis) qendron ne aplikimin praktik te saj.Cdo kush qe ka provuar t’I aplikoj ne realitet analizat e CVP ka zbuluar veshtiresi te medha.Ne kete pjese do te perpiqemi te zgjidhim keto probleme.
In any discussion of CVP analysis, any lecturer, manual or accountant will be frequently heard to say something along the lines of "Let 's assume for a moment that fixed costs remain fixed, even if output changes by a relatively large amount ..." or "Of course, the selling price in this example is constant over the whole range of output ...". There is little doubt that CVP analysis is useful in its proper context: there are many decisions made which positively shout out that CVP analysis has been employed: examples such as reduced price midday meals in restaurants compared to evening meals in the same restaurant; reduced weekend rates in hotels. All such examples are based on CVP reasoning; and there is little doubt that in the short term, at least, these special deals attract clients who would otherwise not be attracted in, and thus help to increase a business 's contribution. Nevertheless, there are problems with CVP analysis when it comes to applying it. How many student accountants or young accountants have gone to work following a riveting read of a chapter on CVP analysis determined to calculate his firm 's break even point only to find that reality is much
Its Assumptions and Their Pitfalls
By Duncan Williamson Introduction The importance of identifying and criticising the underlying assumptions of cost volume profit analysis (CVP analysis) rests on the practical application of it: anyone who has ever tried (or anyone who may wish) to apply CVP analysis in reality, whilst trying to apply the substance of CVP theory will have found severe difficulties. These notes will help you solve those problems.
Rendesia e identifikimit dhe kriticizmit te shtreses se supozimeve te Analizes Kosto Vellim Fitimit (CVP analysis) qendron ne aplikimin praktik te saj.Cdo kush qe ka provuar t’I aplikoj ne realitet analizat e CVP ka zbuluar veshtiresi te medha.Ne kete pjese do te perpiqemi te zgjidhim keto probleme.
In any discussion of CVP analysis, any lecturer, manual or accountant will be frequently heard to say something along the lines of "Let 's assume for a moment that fixed costs remain fixed, even if output changes by a relatively large amount ..." or "Of course, the selling price in this example is constant over the whole range of output ...". There is little doubt that CVP analysis is useful in its proper context: there are many decisions made which positively shout out that CVP analysis has been employed: examples such as reduced price midday meals in restaurants compared to evening meals in the same restaurant; reduced weekend rates in hotels. All such examples are based on CVP reasoning; and there is little doubt that in the short term, at least, these special deals attract clients who would otherwise not be attracted in, and thus help to increase a business 's contribution. Nevertheless, there are problems with CVP analysis when it comes to applying it. How many student accountants or young accountants have gone to work following a riveting read of a chapter on CVP analysis determined to calculate his firm 's break even point only to find that reality is much