Cost-volume-profit (CVP) analysis is an essential tool for
businesses to effectively analyse how changes in sales figures
will affect profits. CVP is a very simple model and is can be
used to aid short-run decisions.  profit analysis: from cost-
volume-profit to advanced analysis  profit analysis: from cost-
volume-profit to advanced analysis  For example, CVP analysis
can help businesses to analyse the profitability of a new
business opportunity or product. It can allow managers to get a
full understanding of the amount of sales required in order to
break even and thus, set prices appropriately.  A CVP analysis
frequently yields surprising results with the minutest of
changes in sales volumes having significant effects on profit.
CVP analysis relies on three central pieces of information to
calculate the relationship between profits and sales: estimates
of sales revenue, gross margin percentage and fixed costs.  The
basic equation for CVP analysis is Profits = Sales – Variable
Costs – Fixed Costs. Using this