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Financial planning programs
Such programs differ in complexity. Some simple programs can include only those variables discussed while other more complicated ones can include an organization’s complete budget.
Many firms use interactive programs of basic CVP equation on their microcomputers to analyze data they have collected and entered. These interactive capabilities allow managers to enter and change their inputs easily and also make the analysis of the financial effects of various alternatives simpler.
The computers’ speed and accuracy in providing information from entered data improve the speed and accuracy with which the manager can select the most profitable actions.
Sensitivity study is one approach for coping with modifications in the values of the variables. It focuses on how a result will be changed if the original estimates or the underlying assumptions change.
The widespread use of spreadsheet packages which do not require programming expertise has enabled management accountants to develop CVP computerized models. The impact of alternative revised plans is quickly identified and changes only implemented when it is apparent that the original estimates are incorrect.
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definition and illustrations
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