Question

Cost-volume-profit analysis is a precise tool for determining the profit consequences of future cost changes, price changes, and volume of activity changes.

a. True
b. False

Answer 1

The statement that cost-volume-profit (CVP) analysis is a precise tool for determining the profit consequences of future cost changes, price changes, and volume of activity changes is false.
CVP analysis is an accounting technique used in management to analyze the effect of sales volume and product costs on operating profit of a business.