What is the primary goal of cost-volume-profit analysis?

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The primary goal of cost-volume-profit analysis is to assess how changes in costs and volume affect a company's operating income and net income. This analytical tool helps businesses understand the relationship between their costs, sales volume, and profitability. By examining different levels of sales and how they interact with fixed and variable costs, management can make informed decisions related to pricing, production levels, and cost control.

This analysis is crucial for understanding break-even points and the margins of safety, which are essential for planning and decision-making. It allows managers to explore different scenarios, such as changes in sales price or sales volume, and assess their potential impact on profitability. This insight is vital for effective short-term financial planning and operational adjustments.

Other options focus on specific aspects of management and strategic planning. While establishing long-term financial strategies, determining pricing strategies, and comparing operational performance are all important activities, they do not encompass the fundamental purpose of cost-volume-profit analysis, which is primarily concerned with understanding the dynamic relationship between costs, sales volume, and profitability.

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