Chartered Financial Analyst and business consultant specializing in managerial accounting and financial modeling for startups.
Our Cost-Volume-Profit (CVP) calculator helps you understand your business’s financial structure. Enter any three of the four variables—Fixed Costs, Sale Price, Variable Cost, or Unit Volume—to solve for the missing one.
CVP Analysis Calculator
Cost-Volume-Profit (CVP) Formula
CVP analysis is built on the break-even formula. Here are the four variations to solve for any variable:
Q = F / (P – V)
Solve for Fixed Costs (F):
F = Q * (P – V)
Solve for Sale Price (P):
P = (F / Q) + V
Solve for Variable Cost (V):
V = P – (F / Q)
Variables Explained
- Fixed Costs (F): Total costs that remain constant regardless of sales volume, such as rent and salaries.
- Sale Price per Unit (P): The revenue earned from selling one unit.
- Variable Cost per Unit (V): The costs incurred to produce one unit, such as raw materials.
- Unit Volume (Q): The total number of units produced and sold.
Related Calculators
- Break-Even Unit Calculator
- Target Profit Calculator
- Margin of Safety Calculator
- Contribution Margin Calculator
What is Cost-Volume-Profit (CVP) Analysis?
Cost-Volume-Profit (CVP) analysis is a critical financial tool used by managers to understand the relationships between costs, sales volume, and profitability. It helps answer fundamental questions like “How many units must we sell to make a profit?” or “What happens to our profit if our costs increase?”
The primary goal of CVP analysis is to determine the **break-even point**—the level of sales at which total revenues equal total costs, resulting in zero profit. However, CVP analysis is broader than just finding the break-even point. It also allows you to calculate the sales needed to achieve a specific **target profit** and to understand your company’s **margin of safety** (the cushion between your current sales and your break-even point).
The entire analysis hinges on the **contribution margin**, which is the Sale Price (P) minus the Variable Cost (V). This represents the amount of money each unit sold “contributes” towards covering the fixed costs and then, once fixed costs are covered, generating a profit.
How to Use CVP Analysis (Example)
Let’s use CVP analysis to find the break-even point for a company that sells custom t-shirts.
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Identify Fixed Costs (F):
The company’s total monthly fixed costs (website hosting, design software, rent) are $5,000.
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Identify Sale Price (P):
They sell each t-shirt for $25.00.
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Identify Variable Cost (V):
The variable cost for each shirt (blank shirt, printing, shipping) is $10.00.
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Apply the Formula: Q = F / (P – V)
First, find the contribution margin: $25.00 (P) – $10.00 (V) = $15.00.
Next, divide the fixed costs by this margin:
Q = $5,000 / $15.00 ≈ 333.33 -
Conclusion:
The company must sell 334 t-shirts per month to cover all costs and break even. The 335th shirt sold will generate their first profit.
Frequently Asked Questions (FAQ)
The biggest limitation is that it assumes fixed costs are constant, and that sale price and variable cost per unit are also constant. In reality, these can change. For example, a company might get bulk discounts (lowering V) or need a bigger warehouse (increasing F) at higher volumes.
A Break-Even calculation is one *part* of CVP analysis. CVP is the overall model used to study the F, P, V, and Q relationship. Break-even analysis specifically uses that model to find the point where profit is zero. CVP analysis also includes target profit and margin of safety calculations.
The Contribution Margin Ratio (CM Ratio) is the contribution margin expressed as a percentage of the sale price: (P – V) / P. It tells you what percentage of each sales dollar is available to cover fixed costs and profit. In our t-shirt example, the CM Ratio is ($25 – $10) / $25 = 0.60, or 60%.
CVP analysis becomes more complex. You must calculate a *weighted-average* contribution margin based on your expected “sales mix” (e.g., 60% t-shirts, 40% hats). This calculator is designed for a single-product analysis.