# of units = (fixed costs + target profit) / CM ratio #4 Margin of Safety Variable Expense Ratio = Total variable costs / Sales #2 Break-Even PointīEP = total fixed costs / CM per unit #3 Changes in Net Income (what-if analysis) With this information, companies can better understand overall performance by looking at how many units must be sold to break even or to reach a certain profit threshold or the margin of safety.
Cost Volume Profit (CVP analysis), also commonly referred to as Break Even Analysis, is a way for companies to determine how changes in costs (both variable and fixed) and sales volume affect a company’s profit.
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