1. BREAKEVEN – CONTRIBUTION
AND
CVP ANALYSIS
-RAHUL KANTAK

2. BREAK EVEN ANALYSIS
Break Even Analysis: Study of cost – volume –
profit relationship.
Total revenue = Total cost.

4. FACTORS AFFECTING BREAK EVEN
Internal Factors
• Employing extra sales staff
• Price increase
• Automation replaces direct labor
External Factors
• Recession cuts demand
• Price war forces price cut
• Inflation pushes up direct costs.

5. ADVANTAGES OF BREAK EVEN ANALYSIS
Simple to conduct and understand.
 Shows profit and loss at different level of
output.
 Can cope with changing circumstances.

6. DISADVANTAGES OF BREAK EVEN ANALYSIS
 Assumes that all output is sold at a given price.
 Regular changes in circumstances reduces its
usefulness as a forecasting tool.
 Based on data from which it is drawn. Poor
quality data would lead inaccurate conclusions.

7. COST – VOLUME - PROFIT ANALYSIS
• If cost behavior is related to sales income, it
shows cost-volume-profit relationship.
• What is the net affect if volume is changed?

8. OBJECTIVE OF CVP ANALYSIS
• Essential to ascertain the relationship between
cost, profit and volume.
• Helpful in setting up flexible budget.

9. CONTRIBUTION ANALYSIS
Payment made by individual
products, recovering the fixed cost of a business.
Total revenue – variable cost