Question

Managers use variations of CVP analysis to answer other questions like:

1. What sales volume is needed to earn a target income?
2. What is the change in income if selling prices decline and sales volume increases?
3. How much does income increase if we install a new machine to reduce labor costs?
4. How will income change if we change the sales mix of our products or services?

Answer 1

Managers use variations of CVP analysis to answer questions related to sales volume, income change, reducing costs, and changing sales mix.

Step-by-step explanation:

Managers use variations of CVP (Cost-Volume-Profit) analysis to answer different questions such as:

1. What sales volume is needed to earn a target income?
2. What is the change in income if selling prices decline and sales volume increases?
3. How much does income increase if we install a new machine to reduce labor costs?
4. How will income change if we change the sales mix of our products or services?

These questions are part of the decision-making process to determine the best course of action for a firm's profitability and growth.