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How Does CVP Analysis Help Management In The Planning Stage Of A New Business
CVP is a decision-making technique that relates the cost of production to the profit
generated from the production process. It is helpful for management of a business entity in the
planning stage because it provides accurate information that can be used to make more
informative decisions (Son, 2014). The CVP analysis is an object-oriented decision-making tool
that provides access to the future direction that the new business entity will take. All the issues
and uncertainties that the business entity may face in its initial stages can be easily analyzed
using the CVP analysis.
The manager will thus rely on CVP as an analytical tool to predict spending that will occur in
the future and also production to work towards the benefit of a business. This will help avoid
failure. CVP is also able to provide a snapshot of the activities occurring within the company.
This can include costs of product and product produced (Hilsenrath, 2013). The cost-volumeprofit analysis will help the ...