CVP Analysis - Dani Ki Costing - CA Final Video Lectures
CVP Analysis - Dani Ki Costing - CA Final Video Lectures | CVP Analysis - Dani Ki Costing - CA Final Video Lectures | CVP Analysis - Dani Ki Costing - CA Final Video Lectures
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Dani
Ki Costing
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Final
Video Lectures
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CVP
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The End
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CVP Analysis, Shut Down and Divestment
CVP stands for Coat – Volume – Profit Analysis. As the name suggests
CVP is nothing but the analysis of three elements namely Cost, Volume and
Profit. There exists a relationship
between Cost, Volume and Profit of the business. And this relationship is a
very technical and advantageous factor. All the three elements viz. cost of
manufacture, volume of sales and product selling price are the most important
for any business. These factors help in estimating the cost to produce required
volume of sales to earn estimated profit in the business.
AVP Analysis helps in taking different decisions regarding accepting
an offer, price mixing, continuance or discontinuance of product etc. One such
decision taken is a decision of Shut down or disinvestment. Such decision should be taken a time of
temporary recession or other temporary problems. Such decision should be taken
on the basis of marginal cost by calculating the contribution. Contribution is
difference between sales and variable cost. In case when this difference is nil
or negative then such decision should be preferable but in the case when such
difference is positive the decision should be vice versa as the contribution is
made by product in fixed cost thereby decreasing the amount of total loss.
Thus the mathematical expression for calculating the shot down point
in numerical terms is as follows:
Shut Down Point = (Total Fixed Cost – Shut Down Costs) /
Contribution per unit
Another strategy in business is of disinvestment. Disinvestment is
selling of whole business or a particular department so that the resources can
be used in other more profitable unit. Such decisions are taken when more
profitable option is available or when the existing business is incurring unbearable
loss or in case when managing of the unit becomes cumbersome.
can u pls tell me from where i can download ca final isca and direct tax lectures..pls help
ReplyDeletecan u pls tell me from where i can download ca final isca and direct tax lectures..pls help
ReplyDeleteI Don't Know dear I know about Costing Lectures only....
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