From the course: Finance and Accounting Tips

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Cost-volume-profit analysis

Cost-volume-profit analysis

From the course: Finance and Accounting Tips

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Cost-volume-profit analysis

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- Have you ever wondered how many customers must come into a McDonald's store every hour of every day, every day of every year for the company to break even? For the company to make no money, but lose no money? - How would you even begin to figure that out? - That brings up to the topic of Cost Volume Profit Analysis, or CVP Analysis. With CVP Analysis we can answer those questions. We can compute how many customers must come into a restaurant, how many fans must attend a baseball game, how many tickets must be sold at a charitable event, for the restaurant, or the team, or the charity to break even. - [Kay] Now step one in this process is that cost must be analyzed and partitioned into costs that vary with the level of activity and costs that are fixed. - Examples for a restaurant of fixed cost are the rent on the building, the cost of the furniture and fixtures, the cost of the salaries of the management. Costs that would vary would include food costs, and the costs of hourly…

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