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CVP Analysis and Break-Even Analysis

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Does CVP Analysis help you decide whether to make or buy, sell at a special price to a customer not in your customer base, etc.?

What about break even analysis?

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Solution Summary

Illustrates use of Cost, Volume, Profit (CVP) Analysis and break-even point calculations. Shows detailed formula for both general CVP calculation as well as the specific break-even point. Also includes discussion on the limitations of CVP analysis. APA format with references.

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Please see the attached files for a more effectively formatted response, as well as more detailed background information on CVP.

INTRODUCTION

CVP analysis aids strategic business plan decisions across an organization. It can aid in deciding how much of something to make, and then in what the price point of a good should be. Specifically, CVP analysis can illustrate how low an introductory price can go in order to epand a customer base, or market share. Break even analysis is simply a specific CVP calculation that illustrates either the minimum price for a good, or the minimum sales volume for the same good required to net zero profit or loss, (Accounting For Management, nd).

CVP ANALYSIS AND BREAK EVEN POINT

CVP can be calculated a couple different ways. The most common is to figure out the break even analysis-either for ...

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