Before launching a product, opening a branch or accepting a lower price, a manager asks a short set of questions. How many units must we sell to avoid a loss? How many for a profit of ₦5 million? What happens to the answer if the price drops 5% or rent rises 10%?
Cost-volume-profit analysis answers these questions with a few lines of arithmetic, and it is one of the most reliably examined topics in the paper.
This topic covers what cost-volume-profit (CVP) analysis is and what it is used for, its assumptions and limitations, the use of contribution (per unit and as a ratio to sales), break-even analysis in units and in naira, the sales needed to earn a target profit, the effect of changes in price and costs, break-even for several products, and finding fixed costs and the contribution ratio from two sets of results.
The next topic covers the margin of safety and the charts used to present CVP information.
In 30 seconds
CVP analysis is an application of marginal costing that examines how selling price, volume, variable cost, fixed cost and profit relate. Contribution per unit = selling price − variable cost per unit (include variable selling costs). C/S ratio = contribution ÷ sales. Break-even units = fixed costs ÷ contribution per unit. Break-even revenue = fixed costs ÷ C/S ratio. Units for a target profit = (fixed costs + target profit) ÷ contribution per unit.
The analysis assumes constant prices and unit variable costs, fixed costs that do not change within the relevant range, production equal to sales, and a constant sales mix.
What CVP analysis is
Cost-volume-profit (CVP) analysis is a management accounting technique for analysing how changes in costs and sales volume affect profit. It shows how costs and profit change as activity changes. It is an application of marginal costing and looks at the relationships between selling price, sales volume, fixed costs, variable costs and profit to support decision making, planning and control. It helps answer:
- How many units must be sold to break even?
- What sales volume is needed to reach a target profit?
- How will profit change if the selling price or cost structure changes?
Applications
| Use | How CVP helps |
|---|---|
| Profit planning | Shows how many units must be sold for a desired profit, so sales targets can be tied to profit goals and the effect of price, cost and volume changes can be tested |
| Break-even analysis | Finds the point where total revenue equals total cost. This is the minimum performance needed to avoid a loss |
| Decision support | Assesses the profit effect of changing a price, adding a product or changing the cost structure |
| Cost control and efficiency | Highlights the balance between fixed and variable costs, encouraging a careful look at the cost structure |
| Budgeting and forecasting | Gives a basis for short-term forecasts of profit from expected volumes and cost behaviour |
| Risk assessment | Tools such as the margin of safety show how far sales can fall before a loss |
Assumptions of CVP analysis
| Assumption | Meaning |
|---|---|
| Costs are fixed or variable | Fixed costs such as rent and managers’ salaries do not change with output. Variable costs such as materials rise in proportion to output. Mixed costs must first be separated (for example by the high-low method) |
| Selling price is constant | No discounts or price changes, so revenue is a straight line with volume |
| Variable cost per unit is constant | No changes in efficiency or input prices |
| Fixed costs are constant over the relevant range | The relevant range is the activity range within which cost behaviour assumptions are valid. Outside it, costs may change |
| Production equals sales | No change in stock, so costs and revenues relate directly to sales |
| Constant sales mix | For multi-product businesses, the proportions of the products sold stay the same |
Limitations of CVP analysis
- Constant price and cost. Prices and unit variable costs fluctuate with competition and suppliers.
- Linearity. Costs and revenues may not be proportional to volume, for example when there are bulk discounts or overtime premiums.
- One product or a fixed mix. A change in the mix of a multi-product business changes the overall contribution and distorts the analysis.
- External factors ignored. The economy, regulation and customer preferences are not in the model.
- Fixed costs are constant only in the relevant range. They may step up when new premises, machines or staff are needed.
The analysis suits short-term decisions in stable conditions. It is of limited use for long-term strategy and ignores non-financial factors such as quality, brand and customer satisfaction.
Contribution
Contribution is the amount left from sales revenue after variable costs. It contributes first to covering fixed costs and then to profit.
Contribution = sales − variable costs. Contribution per unit = selling price − variable cost per unit. Total contribution = units sold × contribution per unit. Profit = total contribution − fixed costs.
The contribution to sales ratio (C/S ratio, also called the profit/volume or P/V ratio) = contribution per unit ÷ selling price per unit. It tells you how many kobo of each naira of sales contributes to fixed costs and profit. Total sales revenue = total contribution ÷ C/S ratio.
Example. A product sells for ₦20. Variable production cost is ₦8 and variable selling cost is ₦2 per unit. Fixed costs (production, administration and selling) are ₦720,000.
- Contribution per unit. Selling price less every variable cost. The variable selling cost counts too.
20 − 8 − 2 = ₦10 - C/S ratio. Contribution as a share of sales.
10 ÷ 20 = 50%
| ₦ | 60,000 units | 72,000 units | 90,000 units |
|---|---|---|---|
| Sales (₦20) | 1,200,000 | 1,440,000 | 1,800,000 |
| Variable costs (₦10) | (600,000) | (720,000) | (900,000) |
| Contribution (₦10 per unit) | 600,000 | 720,000 | 900,000 |
| Fixed costs | (720,000) | (720,000) | (720,000) |
| Profit or (loss) | (120,000) | nil | 180,000 |
At 60,000 units, contribution is too small to cover fixed costs, so there is a loss. Profit rises with volume because contribution rises. Between 60,000 and 90,000 units, there is a break-even point, at 72,000. The contribution can be found without building up sales and costs: 72,000 × ₦10 = ₦720,000.
Break-even analysis
The break-even point is the volume of sales in a period at which a business makes neither profit nor loss. At that point, profit is zero, so total contribution equals total fixed costs. Management wants to know it in order to find the minimum sales needed to avoid a loss, and to assess the risk in the budget by comparing budgeted sales with break-even sales.
Two methods
| Method | Formula | Example (₦720,000 fixed costs, ₦10 per unit, C/S 50%) |
|---|---|---|
| In units | Break-even units = fixed costs ÷ contribution per unit | ₦720,000 ÷ ₦10 = 72,000 units |
| In revenue | Break-even revenue = fixed costs ÷ C/S ratio | ₦720,000 ÷ 0.50 = ₦1,440,000 |
Convert between them: revenue = units × selling price (72,000 × ₦20 = ₦1,440,000); units = revenue ÷ price. The units method is used for one product; the revenue method works for one product or for a business with a constant mix.
Applications of break-even analysis
- Pricing: knowing fixed costs and variable cost per unit shows the minimum price at a given volume.
- Cost control: higher costs raise the break-even point, so managers look for savings.
- Sales targets: the break-even volume is the base for realistic goals at different profit levels.
- Profit forecasting: estimating profit at different volumes and prices.
- Risk assessment: a high break-even point means more vulnerability to a fall in demand.
Target profit
To find the sales needed for a target profit, the total contribution must cover the fixed costs and the target.
Target units = (fixed costs + target profit) ÷ contribution per unit. Target revenue = (fixed costs + target profit) ÷ C/S ratio.
Target profit. For a target profit of ₦300,000 in the example:
- Contribution required. Fixed costs plus the profit you want must all come from contribution.
720,000 + 300,000 = ₦1,020,000 - Units. Divide by the contribution per unit.
1,020,000 ÷ 10 = 102,000 units - Revenue.
102,000 × 20 = ₦2,040,000 - Check with the C/S ratio.
1,020,000 ÷ 0.50 = ₦2,040,000 ✓ - Check against break-even. Sales above break-even earn ₦10 of profit per extra unit.
(102,000 − 72,000) × 10 = ₦300,000 ✓
What if price or costs change?
Because everything runs through contribution, the effect of a change is quick to find. Using the example (price ₦20, variable cost ₦10, fixed costs ₦720,000, break-even 72,000):
| Change | New contribution per unit | New break-even |
|---|---|---|
| Price rises to ₦22 | ₦12 | ₦720,000 ÷ 12 = 60,000 units |
| Variable cost rises to ₦11 | ₦9 | ₦720,000 ÷ 9 = 80,000 units |
| Fixed costs rise 10% to ₦792,000 | ₦10 | ₦792,000 ÷ 10 = 79,200 units |
| Price falls 5% to ₦19 | ₦9 | ₦720,000 ÷ 9 = 80,000 units |
Maintaining profit. Current year: price ₦40, variable cost ₦24, fixed costs ₦320,000, sales 25,000 units. Next year: price up 5%, variable cost up 5% and fixed costs up 10%. How many units must be sold to earn the same profit?
- Profit this year. Contribution per unit is the price less variable cost.
Contribution = 40 − 24 = ₦16
Profit = 25,000 × 16 − 320,000 = ₦80,000 - Next year’s figures. Raise each figure by its percentage.
Price = 40 × 1.05 = ₦42
Variable cost = 24 × 1.05 = ₦25.20
Contribution = 42 − 25.20 = ₦16.80
Fixed costs = 320,000 × 1.10 = ₦352,000 - Units to earn ₦80,000. Fixed costs plus target profit, divided by contribution per unit.
(352,000 + 80,000) ÷ 16.80 = 25,714.3 - Round up. You cannot sell part of a unit, and rounding down would miss the target.
25,715 units
Break-even with several products
Background: the syllabus asks for multiple products, but the syllabus gives only the single-product method. The standard approach uses a constant sales mix.
Fixed costs are common to all products, so break-even is found for the business as a whole. Treat the sales mix as a “package” and find the contribution of the package. A company sells products A and B in the ratio 3 : 2. A sells for ₦50 (variable cost ₦30, contribution ₦20). B sells for ₦100 (variable cost ₦70, contribution ₦30). Fixed costs are ₦1,200,000.
| Units in package | Contribution (₦) | Revenue (₦) | |
|---|---|---|---|
| A | 3 | 3 × 20 = 60 | 3 × 50 = 150 |
| B | 2 | 2 × 30 = 60 | 2 × 100 = 200 |
| Package | 5 | 120 | 350 |
- Break-even packages. Fixed costs divided by the contribution per package.
1,200,000 ÷ 120 = 10,000 packages
A = 10,000 × 3 = 30,000 units; B = 10,000 × 2 = 20,000 units - Break-even revenue. Packages multiplied by the revenue per package.
10,000 × 350 = ₦3,500,000 - Check with the C/S ratio.
C/S ratio = 120 ÷ 350 = 34.29%
1,200,000 ÷ 0.342857 = ₦3,500,000 ✓ - Check with the average contribution per unit. A package holds five units, so divide the package contribution by 5.
120 ÷ 5 = ₦24 a unit
1,200,000 ÷ 24 = 50,000 units (30,000 A + 20,000 B)
If the mix changes, the answer changes. If the company sold more of B (higher contribution), the break-even point would fall, and the reverse.
Finding fixed costs and the C/S ratio from two sets of results
If you are given profit at two sales levels and no cost split, use the difference. Example. At sales of ₦900,000 profit is ₦60,000. At sales of ₦1,000,000 profit is ₦100,000.
- Find the C/S ratio. The extra profit is all contribution, because fixed costs do not change.
Change in profit ÷ change in sales = 40,000 ÷ 100,000 = 40% - Contribution at ₦900,000.
40% × 900,000 = ₦360,000 - Fixed costs. Contribution less profit at that level.
360,000 − 60,000 = ₦300,000 - Break-even revenue. Fixed costs divided by the C/S ratio.
300,000 ÷ 0.40 = ₦750,000 - Sales for a profit of ₦150,000.
(300,000 + 150,000) ÷ 0.40 = ₦1,125,000
This is the high-low idea from the cost behaviour topic applied to sales and profit.
Stepped fixed costs and the relevant range
Fixed costs are fixed only within a range of activity. Suppose the example firm can make up to 80,000 units with its present premises and staff for ₦720,000 a year. To make more, it must open a second shift, adding ₦150,000 of fixed cost. The break-even point (72,000 units) lies in the first band, so it is unchanged.
But for a target profit of ₦600,000, the first band does not work.
- Try the first band.
(720,000 + 600,000) ÷ 10 = 132,000 units - Check the answer against the band. 132,000 is more than the 80,000 limit, so the first band’s fixed costs do not apply.
- Use the second band. It includes the extra fixed costs of ₦150,000.
(720,000 + 150,000 + 600,000) ÷ 10 = 147,000 units
Always check that the answer lies inside the band whose fixed cost you used.
Sensitivity and operating gearing
The ratio of contribution to profit shows how sensitive profit is to a change in sales. At 90,000 units in the example, contribution is ₦900,000 and profit ₦180,000, a ratio of 5 (sometimes called the degree of operating gearing). A 10% rise in sales would raise contribution by ₦90,000, and since fixed costs do not change, profit rises by ₦90,000, which is 50% of ₦180,000. A 10% fall would cut profit by 50%.
Near the break-even point the ratio is very large (at 72,000 units, profit is zero, so a small rise in sales produces an infinite percentage gain). This is why the margin of safety, covered in the next topic, matters for risk.
Target profit after tax
Background: the syllabus deals with target profit before tax. Some questions give a target after tax. Convert it to a before-tax figure first: pre-tax profit = after-tax profit ÷ (1 − tax rate).
Example. The target profit after tax is ₦210,000 and the tax rate is 30%.
- Convert to a before-tax figure.
210,000 ÷ 0.70 = ₦300,000 - Use the usual formula.
(720,000 + 300,000) ÷ 10 = 102,000 units
Using CVP in common short-term decisions
Accepting a special order below normal price. If there is spare capacity and no fixed cost changes, any price above variable cost adds to profit. At ₦14 against a variable cost of ₦10, each unit adds ₦4 of contribution (14 − 10 = 4).
Choosing between two cost structures. A firm can compare a method with low fixed cost and higher variable cost against one with high fixed cost and lower variable cost. The indifference volume is where total costs are equal.
Example. Method X has fixed cost ₦200,000 and variable cost ₦10 a unit. Method Y has fixed cost ₦320,000 and variable cost ₦6 a unit.
- Set the total costs equal. x is the number of units.
200,000 + 10x = 320,000 + 6x - Collect the terms. Take 6x and 200,000 from both sides.
10x − 6x = 320,000 − 200,000, so 4x = 120,000 - Solve.
x = 30,000 units - Read the result. Below 30,000 units X is cheaper. Above 30,000 units Y is cheaper.
Spending on advertising. Compare the extra contribution with the cost of the spend.
Example. An advertising spend of ₦200,000 is expected to raise sales by 25,000 units at a contribution of ₦8 a unit.
- Extra contribution.
25,000 × 8 = ₦200,000 - Compare with the cost. The extra contribution just equals the spend, so it only breaks even. More than 25,000 extra units are needed to make it worthwhile.
The ideas in more depth
Why variable selling cost matters
A common slip is to compute contribution using only variable production cost. If selling or distribution costs vary with sales (commission, delivery per unit), they are deducted too. In the example, ₦8 + ₦2 = ₦10 gives ₦10 contribution. Using ₦8 would give ₦12 and a break-even of 60,000 units, which is wrong.
Operating gearing
A business with high fixed costs and low variable costs has a high C/S ratio and a high break-even point. Once above break-even, profit grows quickly with sales; below it, losses grow quickly. A business with low fixed costs is safer but earns less on extra sales. Management chooses the cost structure that fits its risk preference and expected demand.
Break-even is a point on a line, not a target
Reaching break-even only covers cost. A business needs profit to repay loans, pay dividends and reinvest. That is why target profit calculations matter. A budget set at break-even leaves no room for error.
Revising the relevant range
If volume rises beyond what the factory can make, fixed costs step up (a new shift, more machines). The break-even calculation must then be made again with the new fixed cost. Likewise, a volume discount from a supplier at high volume changes the variable cost per unit. In practice, calculate over each band of activity.
Using the C/S ratio in a mixed business
When a firm has many products and no unit figures, the overall C/S ratio can be used with total fixed costs. Break-even revenue = fixed costs ÷ overall C/S ratio. This is valid only if the mix is stable.
Worked example: a full break-even question
Scenario. Lokoja Pumps Ltd sells a pump at ₦15,000. Variable production cost is ₦8,500 and variable selling cost ₦500 per pump. Fixed costs are ₦5,400,000 a year. Budgeted sales are 1,000 pumps. (a) Find the contribution per pump and C/S ratio. (b) Find the break-even point in units and naira. (c) Find the profit at budgeted sales. (d) Find the sales needed for a profit of ₦1,800,000. (e) Find the break-even point if the price is cut to ₦14,000.
- Contribution per pump and C/S ratio.
Contribution = 15,000 − 8,500 − 500 = ₦6,000
C/S ratio = 6,000 ÷ 15,000 = 40% - Break-even. Fixed costs divided by contribution per pump.
5,400,000 ÷ 6,000 = 900 pumps
In naira: 900 × 15,000 = ₦13,500,000 (also 5,400,000 ÷ 0.40) - Profit at 1,000 pumps. Only 100 pumps are above break-even, each earning ₦6,000.
1,000 × 6,000 − 5,400,000 = ₦600,000 - Sales for a profit of ₦1,800,000. Fixed costs plus target profit, divided by contribution per pump.
(5,400,000 + 1,800,000) ÷ 6,000 = 1,200 pumps (₦18,000,000 revenue) - Price cut to ₦14,000. Contribution falls by ₦1,000.
Contribution = 14,000 − 8,500 − 500 = ₦5,000
Break-even = 5,400,000 ÷ 5,000 = 1,080 pumps - Compare with the budget. Break-even is above the budgeted 1,000 pumps, so the budget would produce a loss.
1,000 × 5,000 − 5,400,000 = −₦400,000, a loss of ₦400,000
Common mistakes in the exam
- Leaving variable selling and distribution costs out of the contribution per unit.
- Using total cost per unit (including fixed cost) instead of variable cost per unit.
- Dividing fixed costs by the selling price instead of the contribution.
- Mixing the C/S ratio method (gives revenue) with the unit method (gives units).
- Forgetting to add the target profit to fixed costs.
- Not rounding units up to a whole number when the target must be reached.
- Applying a price or cost percentage change to the wrong figure.
- For multiple products, using the unweighted average contribution instead of the weighted average at the stated mix.
Quick revision
- CVP is an application of marginal costing. Contribution = sales − variable costs (including variable selling costs).
- C/S ratio = contribution per unit ÷ selling price. Revenue = contribution ÷ C/S ratio.
- Break-even units = fixed costs ÷ contribution per unit. Break-even revenue = fixed costs ÷ C/S ratio.
- Target units = (fixed costs + target profit) ÷ contribution per unit.
- Assumptions: constant price and unit variable cost, fixed costs constant in range, production = sales, constant mix.
- Multiple products: use the package or weighted average contribution at the sales mix.
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer.
Section A style: multiple choice
Question 1. Selling price ₦50, variable cost ₦30. The contribution to sales ratio is:
- 20%
- 40%
- 60%
- 67%
Show the answer
B. 20 ÷ 50 = 40%.
Question 2. Fixed costs ₦600,000 and contribution per unit ₦8. The break-even point is:
- 48,000 units
- 75,000 units
- 600,000 units
- 4,800,000 units
Show the answer
B. ₦600,000 ÷ ₦8 = 75,000 units.
Question 3. Fixed costs ₦240,000 and a C/S ratio of 40%. Break-even revenue is:
- ₦96,000
- ₦600,000
- ₦240,000
- ₦960,000
Show the answer
B. ₦240,000 ÷ 0.40 = ₦600,000.
Question 4. Fixed costs ₦500,000, target profit ₦100,000, contribution per unit ₦4. The target volume is:
- 125,000 units
- 150,000 units
- 175,000 units
- 25,000 units
Show the answer
B. ₦600,000 ÷ ₦4 = 150,000 units.
Question 5. At the break-even point:
- Total contribution equals fixed costs
- Profit is maximum
- Variable costs are zero
- Revenue equals variable costs
Show the answer
A. Profit is zero.
Question 6. An assumption of CVP analysis is that:
- Selling price per unit is constant
- Fixed costs vary with output
- Production always exceeds sales
- Variable cost per unit changes with volume
Show the answer
A. Revenue is then linear with volume.
Question 7. If fixed costs rise and nothing else changes, the break-even point will:
- Rise
- Fall
- Stay the same
- Become zero
Show the answer
A. More contribution is needed to cover them.
Question 8. Selling price ₦20, variable production cost ₦8, variable selling cost ₦2. The contribution per unit is:
- ₦10
- ₦12
- ₦8
- ₦20
Show the answer
A. 20 − 8 − 2 = 10.
Question 9. Profit is ₦60,000 at sales of ₦900,000 and ₦100,000 at sales of ₦1,000,000. The C/S ratio is:
- 40%
- 60%
- 10%
- 25%
Show the answer
A. ₦40,000 ÷ ₦100,000 = 40%.
Question 10. A limitation of CVP analysis is that it:
- Assumes a constant sales mix for multiple products
- Is only for services
- Ignores contribution
- Cannot calculate profit
Show the answer
A. A changing mix distorts the result.
Section B style: written questions
Question 11 (10 marks). Explain the assumptions and limitations of CVP analysis.
Question 12 (20 marks). Edo Furniture Ltd sells a chair at ₦12,000. Variable production cost is ₦7,200 and variable selling cost ₦800 per chair. Fixed costs are ₦6,000,000 a period.
(a) Calculate the contribution per chair and the C/S ratio. (3 marks)
(b) Calculate the break-even point in units and in naira. (4 marks)
(c) Calculate the profit when 2,000 chairs are sold. (3 marks)
(d) Calculate the sales needed for a profit of ₦3,000,000. (4 marks)
(e) Calculate the break-even point if the price is cut by 5%. (4 marks)
(f) State two limitations of CVP analysis. (2 marks)
A further written question
Question 13 (10 marks). At sales of ₦1,200,000 a firm makes a profit of ₦90,000. At sales of ₦1,500,000 the profit is ₦180,000. (a) Calculate the C/S ratio. (3 marks) (b) Calculate the fixed costs. (3 marks) (c) Calculate the break-even revenue and the margin of safety at sales of ₦1,200,000. (4 marks)
Model answers
Show the model answer to Question 11
Assumptions. Costs can be split into fixed and variable elements, with mixed costs separated first. Selling price per unit is constant. Variable cost per unit is constant. Fixed costs are constant within the relevant range of activity. Production equals sales, so stock does not change. For several products, the sales mix is constant.
Limitations. Prices and variable costs are rarely constant because of competition, discounts and supplier changes. The relationship between cost, volume and profit may not be linear, as costs can change in stages. With several products, a changing sales mix alters the overall contribution and distorts the result. External factors such as the economy and regulation are ignored. Fixed costs may step up outside the relevant range.
The technique is best for short-term decisions in stable conditions and ignores non-financial factors.
Show the model answer to Question 12
(a)
- Contribution per chair. Selling price less both variable costs.
12,000 − 7,200 − 800 = ₦4,000 - C/S ratio.
4,000 ÷ 12,000 = 33.3%
(b)
- Break-even in chairs. Fixed costs divided by contribution per chair.
6,000,000 ÷ 4,000 = 1,500 chairs - Break-even in naira.
1,500 × 12,000 = ₦18,000,000
(c)
- Profit at 2,000 chairs. Total contribution less fixed costs.
2,000 × 4,000 − 6,000,000 = ₦2,000,000
(d)
- Chairs for the target profit. Fixed costs plus the target profit of ₦3,000,000, divided by contribution per chair.
(6,000,000 + 3,000,000) ÷ 4,000 = 2,250 chairs - Sales revenue.
2,250 × 12,000 = ₦27,000,000
(e)
- New price. A 5% cut.
12,000 × 0.95 = ₦11,400 - New contribution.
11,400 − 8,000 = ₦3,400 - Break-even. Round up, because part of a chair cannot be sold.
6,000,000 ÷ 3,400 = 1,764.7, so 1,765 chairs
(f) Any two: assumes constant price and cost; assumes linear relationships; assumes a fixed sales mix; ignores external factors; fixed costs may step up outside the relevant range.
Show the model answer to Question 13
(a)
- C/S ratio. The extra profit is all contribution, so divide the change in profit by the change in sales.
(180,000 − 90,000) ÷ 300,000 = 90,000 ÷ 300,000 = 30%
(b)
- Contribution at ₦1,200,000.
30% × 1,200,000 = ₦360,000 - Fixed costs. Contribution less profit at that level.
360,000 − 90,000 = ₦270,000
(c)
- Break-even revenue. Fixed costs divided by the C/S ratio.
270,000 ÷ 0.30 = ₦900,000 - Margin of safety. Budgeted sales less break-even sales.
1,200,000 − 900,000 = ₦300,000, which is 25% of sales (300,000 ÷ 1,200,000)
Pathfinder on CVP analysis and break-even point
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
An item asks for the company’s break-even point in units from budgeted data, testing contribution per unit and fixed costs.
Revise first: Break-even analysis
An item gives budgeted fixed overhead of ₦2,700,000 and asks for the break-even point in value.
Revise first: Contribution
Multiple-choice items often ask for the break-even point, the target volume or the effect of a change in price or cost. Check Section A of every diet you practise.
Revise first: Target profit
Written questions can ask for break-even, target profit and the effect of price or cost changes, with comments on the assumptions of CVP analysis.
Revise first: Assumptions of CVP analysis
Source: ICAN Pathfinder, Management Accounting. Diets covered: November Diet, 2025 and May Diet, 2026. May Diet, 2025 and November Diet, 2024 are not covered here.
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