Break-even point and cost-volume-profit analysis are both based on the income statement formula.

Question

Quizplus · Accepted Answer

Both break-even point analysis and cost-volume-profit (CVP) analysis are based on the relationships among sales, costs, and profits, which are components of the income statement formula. These analyses use the income statement formula to determine the sales volume at which a company neither makes a profit nor incurs a loss (break-even point) or to understand how changes in costs and volume affect a company's profit (CVP analysis).

Break-Even Point and Cost-Volume-Profit Analysis Are Both Based on the Income