Cost Volume Profit analysis is an essential topic of decision making. The management has to understand the behavior of various costs and profits and how they change with multiple volumes. This will facilitate proper planning and cost control. Besides, it assists the business in finding the suitable price, the contribution, and the break-even units. Firms are created with the aim of profit maximization. This tool provides a way that the profit can be estimated and varied at various levels. This is crucial in the preparation of a flexible budget. CVP can take into consideration only one product or a variety of products.
Shortcomings of multi-product even analysis?