What is cost, volume , profit analysis?

CVP analysis is also known as Breakeven analysis. It is the study of effects on the future profit of changes in fixed cost, variable cost, sales volume, quantity and mix. CVP analysis is developed on marginal cost concept that required seperate identification of Variable and Fixed Cost.

Yes,  Cost of product includes direct material+ direct labour + manufacturing Overhead.

Yes, Break even in quantity = Toal fixed cost/unit contribution

This is also called the breakeven point analysis. I beleive that it is not a decision making factor but it is certainly very helpful is identifying unreasable alternative and eliminating taking them any further.

Direct cost of a product = direct material cost + direct labor cost + manufacturing overheads

Breakeven quantity is the quatitiy at which total cost = total revinue

Cost volume analysis is also called Break even analysis.

Cvp=BEP.

Break even point is a point at which fixed expenses is equal to contribution.

Sales - Variable cost is contribution.

In this point there is no profit or no loss arising from the sales.

Regards,

Joshi Mathew

CIA

Agreed with colleagues answers

Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there are several assumptions made, including:

1. Sales price per unit is constant.
2. Variable costs per unit are constant.
3. Total fixed costs are constant.
4. Everything produced is sold.
5. Costs are only affected because activity changes.
6. If a company sells more than one product, they are sold in the same mix.

CVP analysis requires that all the company's costs, including manufacturing, selling, and administrative costs, be identified as variable or fixed.