Cost-volume-profit analysis (CVP) is used to calculate how the changes in volume and costs impact a company's net income and operating income. CVP is one of the effective tool which helps accountants to make decision regarding future operation.

Benefits of CVP


  • Helps to analyze which services and products are profitable and how can business use these services and products to get the maximum sum of revenue.
  • Explains what sales volume will be necessary by the business in order to reach a fixed level of profits.
  • Tells how much revenue should the business target to avoid losses occur.
  • Highlights what would be expected budget of the business.
  • Helps todetermine business’s fixed costs and measure the amount of risk related with any investment.
  • Operating Leverage
  • Income Tax Benefits
  • Future Forecasting
  • Helps to prepare budgets
  • Helps to control cost
  • Helps in products or services Price Determination
  • Helps in profit planning.