The Use of Program CVP in Teaching Cost-Volume-Profit Analysis

Abstract

Cost-volume-profit (breakeven) analysis, the study of the relationships of the factors affecting profits, is usually first introduced to college students in their second accounting course, managerial accounting. Breakeven analysis at that level is a fairly simple concept used to determine the number of units of a product which must be sold in order to cover its variable costs and share of fixed costs. The breakeven point is that point at which there is no profit or loss, or where total revenues equal total expenses. Profits, either before or after taxes, may also be incorporated into the model to determine the number of units which must be sold to yield a certain profit.