Cost-volume-profit analysis

Cost-volume-profit analysis models how price, activity, variable cost and fixed cost affect contribution and profit. In a simple single-product model, profit = unit contribution × units sold − fixed costs. It supports break-even, safety-margin and target-profit calculations. Assumptions commonly include constant unit prices and variable costs, fixed cost within the relevant range and a stable product mix. It simplifies reality and should be checked against capacity, demand and uncertainty.