Cost-Volume-Profit Analysis (CVP)
Accounting glossary · Understand, connect, apply
Cost-volume-profit analysis models how selling prices, sales volume, variable costs, fixed costs and sales mix affect operating profit. It helps test break-even levels and target-profit plans.
Example
At a price of 40, variable cost of 25 and fixed costs of 9,000, selling 1,000 units gives 15,000 contribution and 6,000 operating profit.
Formula and assumptions
Operating profit = total contribution − fixed costs
Remember the difference
A simple linear model assumes costs and prices behave consistently within a relevant range. Capacity limits, changing mix, inventory movements or price discounts may require a more detailed model.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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