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Limitations of CVP Analysis
The make use of the basic CVP model is just only relevant to planning and decision-making in an activity range whether the basic cost and revenue behavior suppositions are valid. Outside the relevant range, CVP methods may still be applied so long as the varying or changeable cost and revenue nature patterns are taken as consideration.
Conversely, the limitations o CVP analysis is in fact its assumptions that do not hold outside the relevant range.
explain the practical application of differential costing with the help of suitable example.
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