After reading this article you will learn about the meaning and ascertainment of cost-volume-profit. Meaning of Cost-Volume-Profit: We know that profit is one of the most important factors while measuring business/ firm's performances. Micro economic theory tells us that profit is a signal for the allocation of resources and a yardstick for measuring managerial efficiency in a market economy. Moreover, [...]
After reading this article you will learn about Profit/Volume (P/V) Graph:- 1. Meaning of Profit/Volume Graph or Profit Chart 2. Method of Constructing P/V Graph. Meaning of Profit/Volume Graph or Profit Chart: A P/V Graph expresses the relationships between profit and volume. Its usefulness is to show a direct relationship between profit and the volume of sales. While contracting this [...]
After reading this article you will learn about Operating Leverage:- 1. Introduction to Operating Leverage 2. Method of Computing Operating Leverage 3. Degree 4. Relationship between Operating Leverage and CVP Analysis. Introduction to Operating Leverage: Operating leverage arises when the operating profit varies disproportionately with the amount of sales, i.e., it appears from the existence of fixed operating expenses. Because [...]