A cost-volume-profit (CVP) analysis is a systematic method of examining the effects of changes in an
organization’s volume of activity on its costs, revenue and profit. It is useful for the management in knowing how profit is influenced by sales volume, sales price, variable expenses and fixed expenses.
Broadly, CVP analysis uses the techniques of :
1. Break-even analysis and
2. Profit-volume (P/V) analysis
Objective of CVP Analysis
The objective of the CVP analysis is to establish what will happen to the financial results if a specified level of activity or volume fluctuates.
