Cost-Volume-Profit (CVP) Analysis is a vital managerial accounting tool used to understand how changes in costs, sales volume, and prices affect a company’s profit. It helps businesses determine the break-even point — the level of sales at which total rev

Essential to understand the cost and volume and profit relation. Its imporatnt for sales management

1. 1 Cost-Volume-Profit Analysis 7.10.2025 Dr. Vidhita Sinha School of Management Studies & Liberal Arts

2. Outline Lecture Structure Objectives Recap of Previous Lecture Industry Relevant Examples Interactive Activities GSFC Core Values Dr. Vidhita Sinha, School of Management & Liberal Arts 2 Cost-Volume-Profit Analysis 7.10.2025

3. 3 Lecture Structure Reference: Office Order No. Provost/092023135, Date: 18 th September 2023 Recap of Previous Lecture 05 Minutes Delivery of Actual Content as per Lesson Plan 30 Minutes Outline & Objectives 05 Minutes Importance of Discipline 02 Minutes Industry Relevance 05 Minutes Interactive Activities 10 Minutes Recording of Attendance 03 Minutes Dr. Vidhita Sinha, School of Management Studies & Liberal Arts Cost-Volume-Profit Analysis 7.10.2025

4. Dr. Vidhita Sinha, School of Management & Liberal Arts 4 Objectives Cost-Volume-Profit Analysis To understand Cost Volume and Profit Relationship To understand Break Even Point 7.10.2025

5. Dr. Vidhita Sinha, School of Management & Liberal Arts 5 Recap Cost-Volume-Profit Analysis Sales Territory Types of Sales Territory 7.10.2025

6. Cost-volume-profit (CVP) analysis is the study of the effects of output volume on revenue (sales), expenses (costs), and net income (net profit). 7.10.2025 Dr. Vidhita Sinha, School of Management & Liberal Arts 6 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. Meaning & Definition Cost-Volume-Profit Analysis Per Unit Percentage of Sales Selling price (trip ) £250 100% Variable cost (fuel) 200 80 CONTRIBUTION (S.P-V.C) £ 50 20%

7. The break-even point is the level of sales at which revenue equals expenses and net income is zero. Sales - Variable expenses - Fixed expenses Zero net income (break-even point) 7.10.2025 Dr. Vidhita Sinha, School of Management & Liberal Arts 7 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. Cost-Volume-Profit Analysis Break-Even Point

8. CVP analysis: non-graphical computations 7.10.2025 Dr. Vidhita Sinha, School of Management & Liberal Arts 8 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. Cost-Volume-Profit Analysis 1 . Fixed costs per annum £60 000 Unit selling price £20 Unit variable cost £10 Relevant range 4 000 - 12 000 units 2. Profit volume (P/V) ratio = Contribution x 100 Sales revenue 3. Break-even point (in units) = Fixed costs Contribution per unit 4. Break-even point (in sales value i.e. £ or £ ) = Fixed costs P/V ratio

9. All other variables remain constant e.g. sales mix, production efficiency, price levels, production methods. Complexity-related fixed costs do not change. If the range of items produced increases but volume remains unchanged, then it is assumed fixed costs will not alter. Profits are calculated on a variable costing basis. Unit variable cost and selling price are constant per unit of output. The analysis applies over the relevant range only. Costs can be accurately divided into their fixed and variable elements. Single product or constant sales mix. 7.10.2025 Dr. Vidhita Sinha, School of Management & Liberal Arts 9 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. Cost-Volume-Profit Analysis C-V-P Assumptions

10. Dr. Vidhita Sinha, School of Management & Liberal Arts 10 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. 7.10.2025 Cost-Volume-Profit Analysis Margin of Safety How much can sales drop before we incur a loss? Margin of safety = Expected Sales – Break even sales Percentage margin of safety = Expected sales - Break-even sales Expected sales Operating profit = p/v ratio x(Exp. Sales-Break-even sales)

11. Dr. Vidhita Sinha, School of Management & Liberal Arts 11 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. 7.10.2025 Cost-Volume-Profit Analysis Cost-Volume-Profit Graph

12. Dr. Vidhita Sinha, School of Management & Liberal Arts 12 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. 7.10.2025 Industry Relevance - Effective Team Cost-Volume-Profit Analysis Industry Applications Manufacturing: Deciding production levels, automation vs. manual labor, and pricing new products. Service Sector: Optimizing service mix and resource allocation. Retail: Evaluating discount strategies and promotional effectiveness. Startups: Assessing viability and sustainability before scaling.

13. Divide the class into small groups and assign each group a hypothetical company (e.g., a café, clothing brand, or gadget startup). Provide fixed costs, variable costs, and selling prices. Ask them to calculate the break-even point and discuss how changing price or cost affects profit. Each group will then present how they would adjust their business strategy based on their CVP findings. 7.10.2025 Dr. Vidhita Sinha, School of Management & Liberal Arts 13 Reference: Aswathappa, K. Organizational Behaviour. New Delhi: Himalaya Publishing House. Interactive Activity- Effective Team Cost-Volume-Profit Analysis

14. Dr. Vidhita Sinha, School of Management & Liberal Arts 14 Reference: https://stock.adobe.com/in/search?k=honesty. 7.10.2025 GSFC U VALUES Group & Team