Cost volume profit shows the its impact of changes in the output level, the selling price, the variable cost or fixed cost on the total revenues, total costs, and operating income. So, it is systematic examining the relationship between changes in activity and changes in total revenues, expense and net profit.

It is management accounting tool to show the relationship between the elements of profit planning. One of the popular technique to evaluate cost-volume-profit relationships is break-even analysis." BEA  is concerned with the study of revenues and costs in relation to sales at which the firm's revenues and total costs will be exactly equal or the net income will be zero". 
CVP is supplementary  tool of profit planning: aid in sales planning and cost estimation. Provide following answer:

-Minimum level of sales required to cover total cost so as t avoid loss
-Sales required to earn certain amount of profit
-answer the effect of changes in selling price on profit
-the effect of changes in cost on sales and profit 

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BEP=fixed costs/CMPU

CMPU=Selling price per unit- Variable Cost per unit


Limitations of CVP analysis

-Classification of all costs as variable and fixed
-Constant selling price fro any volume in the short run
-No effect of the size of inventory on net income
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