Cost-volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the break-even point. Once the break-even point has been reached, operating income will increase by the:

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The break-even point is the level of sales at which total revenues equal total costs, resulting in zero profit. Beyond this point, each additional unit sold increases operating income by the amount of the contribution margin per unit, which is the selling price per unit minus the variable cost per unit. Fixed costs do not change with the number of units sold, and variable costs are covered in the calculation of the contribution margin.

Cost-Volume Profit (CVP) Analysis Is a Key Factor in Many