Break Even Analysis Model

Managers must make decisions about sales volume, pricing and costs and are concerned about the impact of their decisions on profit. Therefore, they need to understand the relations among revenues, costs, volume and profit. Cost-volume-profit, or CVP, analysis provides managers with information for decision making.

What is CVP?

CVP analysis explores the relationship between sales revenue, cost and their effect on profits. Also known as Break-even analysis.

Key Model Outputs

Contribution margin

Contribution margin ratio

Break-even point

Target profit

Margin of safety

Operating Leverage

Break Even Chart

Multiproduct Analysis