Cost-volume-profit (CVP) analysis is a method or process for figuring out how cost, volume, and profit are related to each other.
The most basic tool is cost-volume-profit (CVP) analysis because it offers simple methods for examining how changes in costs and volume affect a company’s profits.
Cost-volume-profit (CVP) analysis is the study of the effects on future profit of changes in fixed costs, variable costs, sales price, quantity, and mix.
According to CIMA’s Official Terminology
Lastly, we can say that cost-volume-profit analysis is the study of the relationships between changes in an organization’s production costs, an increase or decrease in production volume, or a change in sales price and profit.
You can also read:
- Top 10 objectives of CVP analysis
- Uses of cost-volume-profit (CVP) analysis
- 16 important assumptions of CVP analysis
