Final answer:
Cost-Volume-Profit (CVP) analysis helps managers understand how altering variables affects outcomes, is utilized for "what-if" scenarios, and aids a variety of decision-making processes. It is not exclusive to single product companies. The correct answer is option b.
Step-by-step explanation:
The question is about Cost-Volume-Profit (CVP) analysis, which is a tool used in managerial accounting to analyze how changes in cost and volume affect a company's operating profit. In response to the multiple-choice question on what CVP does, the correct statements are:
- A: allows managers to see how changing one variable can impact another
- B: can be used for "what-if" analysis
- C: can be used to make many different decisions
Contrary to what option D suggests, CVP analysis is not just limited to single product companies. It can be applied to multiple-product companies as well, but the analysis may become more complex. The concept of ceteris paribus, which means 'all other things being equal', is often utilized in CVP to examine the effect of one variable at a time, while holding others constant. This approach helps in managing the complexity and providing clarity to decision-making.