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On a CVP chart, the slope of line which starts at the level of fixed costs and slopes upwards is variable cost per unit 3.
What is CVP analysis?
When deciding on short-term business strategies, leaders use the financial planning tool known as Cost Volume Profit (CVP) Analysis, also referred to as break-even analysis. This demonstrates to business decision-makers the impact of variations in selling price, costs, and volume on profits. Leaders in financial planning and analysis use break-even analysis as their most frequent method of applying CVP. The most straightforward way to describe break-even analysis is to say that it involves figuring out how many sales are required to reach the breakeven point in terms of cost of operations. A CVP analysis is immediately necessary given the risks of not performing one. In his book Pizza Tiger, Tom Managhan, the creator of Domino's Pizza, provides a real-world illustration of a CVP issue he encountered in the beginning.
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