Cost-volume-profit analysis

Cost-volume-profit analysis models how profit responds to changes in sales volume, selling price, variable costs, or fixed costs, using the contribution margin as the central building block.

Also known asCVP

ByHoang TruongUpdated June 30, 2026

FrameworkCost-volume-profit (CVP) analysis

See it move

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A cost–volume–profit chart plots revenue and total cost lines against units sold, with the two lines crossing at the break-even point of 4,000 units. The parameters are a selling price of €50, variable cost of €30, contribution margin of €20 per unit, and fixed costs of €80,000; the zone to the left of 4,000 units represents a loss and the zone to the right a profit — at 5,000 units, profit equals €20 multiplied by 5,000 minus €80,000, giving €20,000.

Where it fits

SubjectCost AccountingCoreTopicCost-Volume-Profit AnalysisCore

The formula

LaTeX

\pi = (P - v) \times Q - F

Variables

$π$: Operating profit (€)
$P$: Selling price per unit (€)
$v$: Variable cost per unit (€)
$Q$: Units sold (units)
$F$: Total fixed costs (€)

Core CVP profit equation

LaTeX

Q_{BE} = \frac{F}{P - v}

Variables

$Q_{B} E$: Break-even volume in units (units)
$F$: Total fixed costs (€)
$C M p er U ni t$: Contribution margin per unit (P − v) (€)

Break-even volume — derived by setting profit to zero

Check yourself

PracticeCORE

A company sells a product at €60 per unit with variable costs of €36 per unit and total fixed costs of €96,000. What is the break-even point in units?

Select an answer to check your understanding.