Using Cost-Volume-Profit Models for Sensitivity Analysis

Making predictions about future sales, volume levels, and market conditions can be challenging. However, there are many tools that can help organizations forecast more accurately and effectively. One of these tools is the cost-volume-profit analysis. Companies can begin this process by evaluating their break-even point. From there, they will set profit goals, consider their fixed and variable costs, and determine the volume needed to achieve their goals. The cost volume profit analysis also enables and organization to consider how changes in each of the factors within the equation might impact the overall outcome. At the end of the section, you will be able to identify the factors that enable companies to estimate volume.