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9706 · 2.2.4

Cost-volume-profit analysis

9706 - break-even, margin of safety, target profit, CVP charts, multi-product scenarios, and key assumptions for Paper 2.

Need to know

What you need to know

  • Calculate break-even point in units and revenue.
  • Determine margin of safety in units and percentage.
  • Calculate sales volume for a target profit.
  • Construct and interpret CVP charts.
  • State the assumptions of CVP analysis.
  • Calculate break-even for a multi-product business.

Explanation

Cost-volume-profit analysis

  1. Calculate break-even point in units and revenue.
  2. Determine margin of safety in units and percentage.
  3. Calculate sales volume for a target profit.
  4. Construct and interpret CVP charts.
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