After understanding and studying CVP analysis:

1. How can CVP analysis help a manager during planning?

 CVP or Cost Volume Profits determine the changes in cost and volume that can affect to their
operating expenses and income. After considering all the variable expenses, CVP analysis is used
to calculate the contribution margin. It helps manager to calculate the cost of the product per
unit.

2. What are the principal assumptions of CVP analysis?

 The assumptions are constant sales price, constant variable cost per unit, constant total fixed
cost, and units sold equal units produced.

3. The break-even graph differs from the profit-volume graph in?

 The graph of profit-volume relies solely on displaying a profit/loss line and does not display the
expense and sales lines separately, while break even graph shows how fixed costs, variable
costs, overall costs and total sales change with the amount of production, the break-even point
can be determined.

4. Explain the Degree of operating leverage and margin of safety.

 The Degree of operating (DOL) is a multiple that measures how much the operating income of a
business will change in response to a revenue change. and the margin of safety is an accounting
theory in which an investor purchases shares only when their stock price is considerably lower
than their intrinsic value.