Cost Volume Profit Analysis

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CVP analysis is done when Total Revenue = Total Costs, and when the break- even point of the cost need to be assumed according to the batch of quantity is required is known as Economic Order Quantity or known as Break-even point. The pattern of supply and demand for the item is assumed with the certainty of various costs. The major objective of managing cost is to maintain the optimum level of investment required.
For Example:
Selling Price $90.00 per unit
Variable Costs $63.00 per unit
Fixed Costs $135,000
Break Even Point Formula = Total fixed costs / Selling Price per unit – Variable price per unit
= $135,000 / $90 - $63
= $135,000 / $27
Answer = $5,000

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