Cost volume profit analysis (CVP analysis) is one of the most powerful tools that managers have at their command. It helps them understand the interrelationship between cost, volume, and profit in an organization by focusing on interactions among the following five elements:
Prices of products
Volume or level of activity
Per unit variable cost
Total fixed cost
Mix of product sold
Because cost-volume-profit (CVP) analysis helps managers understand the interrelationships among cost, volume, and profit it is a vital tool in many business decisions. These decisions include, for example, what products to manufacture or sell, what pricing policy to follow, what marketing strategy to employ, and what type of productive facilities to acquire.
Prices of products
Volume or level of activity
Per unit variable cost
Total fixed cost
Mix of product sold
Because cost-volume-profit (CVP) analysis helps managers understand the interrelationships among cost, volume, and profit it is a vital tool in many business decisions. These decisions include, for example, what products to manufacture or sell, what pricing policy to follow, what marketing strategy to employ, and what type of productive facilities to acquire.
If the necessity for the write down is discovered during an accounting period then no special treatment is needed. The inventory is simply measured at the NRV when it is included in the year end financial statements. This automatically includes the write down in cost of sales.If the problem is discovered after the financial statements have been drafted.Thanks for sharing useful Information for the reasearch and it's very helpful. Being best ca coaching in hyderabad . One of the Leading Coaching Centres in Hyderabad for Chartered Accountancy.
ReplyDeleteThanks for sharing useful Information.The amount of fixed overhead allocated to each unit of production is not increased if actual production capacity falls short of the normal capacity for any reason. Similarly, the amount of fixed overhead allocated to each unit of production is not decreased if actual production capacity is higher than the normal capacity Being Best ca course fees in coimbatore . One of the Leading Coaching Centres in Coimbatore for Chartered Accountancy.
ReplyDeleteThanks for sharing useful Information. When the cost of an item of inventory is less than its net realisable value the cost must be written down to that amount.
ReplyDeleteComponent A1 in the previous example was carried at a cost of Rs. 8,000 but its NRV was estimated to be Rs. 7,300.The item must be written down to this amount. How this is achieved depends on circumstance and the type of inventory accounting system. Being Best best CS Classes institute in Coimbatore One of the Leading Coaching Centres in Coimbatorei for C.S Certified Accountant (CS) Course.
IAS2 states that ‘the cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.Thanks for sharing useful Information. Being Best best CS Classes institute in Coimbatore One of the Leading Coaching Centres in Coimbatore for company secretary Certified Accountant (CS) Course.
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