Kindly see attached file
1. What are the components of cost-volume-profit (CVP) analysis?
The components of cost-volume-profit analysis include:
The activity level, which accounts for the total number of units sold during the period for each
The price per unit, which represents the average price of the units sold during this period
The variable cost per unit, which takes into account both the cost of the materials used in the
production of each unit and the sales commissions
The total fixed cost of the company during the time period
2. How does a CVP income statement help management make decisions?
The income statement prepared using cost-volume profit analysis enables the managers of the
company to rapidly evaluate which are the most expensive and the most profitable activities carried out
by the company. In this regard, the calculation of the income and costs of each single activity performed
by the company helps the decision-making process of the managers as they can focus on the activities
providing the highest profitability or minimizing the costs. Further, it helps in the allocation of resources,
as the manager knows exactly how many resources are necessary for t...