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Question #1: Why is CVP analysis generally used as a short-run tool? Would CVP ever be appropriate as a long-run model? Hi Professor and class, Being a manager, a person constantly strives to relate these elements to achieve the maximum profit. Apart from profit projection, the concept of Cost-Volume-Profit (CVP) is relevant to virtually all decision-making areas, particularly in the short run. CVP is a short run , marginal analysis, it assumes that unit variable costs and unit revenues are
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Unformatted text preview: constant, which is appropriate for small deviations from current production and sales, and assumes a clean division between fixed costs and variable costs, though in the long run all costs are variable. CVP can be used in a long-run model because it takes a period look at a product. The period can be a year and the data can then be extrapolated over the life of the product to give an estimate of the performance. Jack...
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