The following is last month's contribution format income statement:   Sales (8 000 units)  ................  R800 000   Less variable expenses ............. 500 000   Contribution margin .................   300 000   Less fixed expenses .................  200 000   Net income ..........................     R100 000   What is the company's degree of operating leverage?   A. 0.125   B. 8.0   C. 3.0   D. 0.333

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Cost volume profit (CVP) analysis

CVP analysis is a cost-volume-profit technique of cost accounting that examines the influence of varying levels of expenses and volume on operating profit. Cost Volume Profit analysis determines the relationship between Cost, Sale Volume, sales price, and Profit. CVP analysis is also known as break-even analysis which helps the business organization, banks, and their management to determine and forecast how a change in total sales and cost affects the profit of the organization. CVP analysis helps in financial decision-making for the budget, expense, tax, market investment, and corporate finance and aims at measuring variations in cost and volume.