Why is cvp analysis more difficult when using absorption costing than when using variable costing?.

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camiilajakobsen3991 camiilajakobsen3991

13-04-2022
Business

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Why is cvp analysis more difficult when using absorption costing than when using variable costing?.

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Tundexi Tundexi · Answer 1 · 2022-04-25T11:40:34+02:00

CVP analysis is more difficult because its requires costs to be broken down between variable and fixed which is not done in absorption costing.

What is a CVP analysis?

This is an analysis that find out how changes in the firm's variable and fixed costs affect the firm's profit.

Hence, the analysis is difficult when using absorption costing than when using variable costing because its requires costs to be broken down between variable and fixed which is not done in absorption costing.