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C-V-P ANALYSIS UNDER UNCERTAINTY
A major limitation of the basic C.V.P analysis is the assumption that the unit variable cost, selling price and the fixed costs are constant and can be predicted with certainty. These factors however are variables with expected values and standard deviations that can be estimated by management.
There are different ways of dealing with uncertainty. Examples comprise:
MOTIVES FOR HOLDING INVENTORIES If production and delivery of goods were instantaneous, there would be no need for inventories. However in reality, the manufacturing and purcha
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