Page 241 - BA2 Integrated Workbook STUDENT 2018
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Short-term decision making
Breakeven analysis
In breakeven analysis we start to consider the effects on future profit caused by
changes in elements such as fixed and variable costs, sales price and volume.
Breakeven analysis is also known as Cost Volume Profit (CVP) analysis.
Cost–volume–profit (CVP) analysis is defined in The CIMA
Terminology as the ‘study of the effects on future profit of changes in
fixed cost, variable cost, sales price, quantity and mix’.
We will use the following example throughout this section:
A company produces a single product, details of which are as follows:
Selling price per unit $120
Variable cost per unit $80
Fixed costs for the period $10,000
The company planned to produce and sell 1,000 units in the period.
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