Cost Volume‐Profit Analysis is the analysis of three variables viz. Cost, Volume and Profit, which explores the relationship existing amongst Costs, Revenue, Activity Levels and the resulting Profit. The Cost Volume Profit Analysis is also known as Break even Analysis.
According to Chartered Instititute of Management Accountants, London : “CVP the study of the effects on future profit of changes in fixed cost, variable cost, sales price, quantity and mix”.
The break-even point in any business is that point at which the volume of sales or revenues exactly equals total expenses or the point at which there is neither a profit nor loss under varying levels of activity. The break-even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. In another words breakeven point is the level of sales or production at which the total costs and total revenue of a business are equal.
According to Chartered Instititute of Management Accountants, London : “CVP the study of the effects on future profit of changes in fixed cost, variable cost, sales price, quantity and mix”.
The break-even point in any business is that point at which the volume of sales or revenues exactly equals total expenses or the point at which there is neither a profit nor loss under varying levels of activity. The break-even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. In another words breakeven point is the level of sales or production at which the total costs and total revenue of a business are equal.
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