9706 · 2.2.4
Cost-volume-profit analysis — FAQ
Frequently asked questions for 9706 Cost-volume-profit analysis. Direct answers first, then deeper explanation — then practise with marking.
Is CVP the same as break-even analysis in 9609?
The core maths is identical. 9706 Paper 2 may require more formal accounting presentation, journal awareness, and chart drawing; 9609 adds more evaluation of business context.
When is CVP analysis unreliable?
When its core assumptions break down: e.g., if discounts change the selling price, step costs increase fixed costs, the product mix shifts, or output is far outside the relevant range.
How do you calculate break-even for a business selling multiple products?
You must first assume a constant sales mix (e.g., for every 2 units of A, you sell 3 of B). Then, you calculate a weighted average contribution per unit based on this mix. Finally, you divide the total fixed costs by this weighted average contribution to find the total number of units to break even, which you then apportion back to the individual products.