Cost-Volume Profit Analysis


DEFINITION of 'Cost-Volume Profit Analysis'

A method of cost accounting used in managerial economics. Cost-volume profit analysis is based upon determining the breakeven point of cost and volume of goods. It can be useful for managers making short-term economic decisions, and also for general educational purposes.

BREAKING DOWN 'Cost-Volume Profit Analysis'

Cost-volume profit analysis makes several assumptions in order to be relevant. It often assumes that the sales price, fixed costs and variable cost per unit are constant. Running this analysis involves using several equations using price, cost and other variables and plotting them out on an economic graph.

  1. Cost Accounting

    A type of accounting process that aims to capture a company's ...
  2. Volume

    The number of shares or contracts traded in a security or an ...
  3. Profit

    A financial benefit that is realized when the amount of revenue ...
  4. Intangible Cost

    An unquantifiable cost relating to an identifiable source. Intangible ...
  5. Tangible Cost

    A quantifiable cost related to an identifiable source or asset. ...
  6. Accountant

    A professional who performs accounting functions such as audits ...
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