Cost/volume/profit analysis

Free IMA CMA Part 2 (Strategic Financial Management) lesson in Business Decision Analysis. 17 min read, ~2,521 words.

CVP examines how total revenue, total cost, and operating income shift when selling price, variable cost per unit, fixed cost, or volume changes (one variable at a time). Contribution margin (CM) = Price − Variable cost per unit. CM ratio = CM / Price. Operating income = (CM per unit...