Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

Picture of a scale with Revenue (represented by six boxes) on one side and Expenses (represented by one box) on the other.
Figure 3.1 Balancing Cost, Volume, and Profit. Managers employ cost-volume-profit (CVP) analysis to determine the sales level at which they break even or balance their revenue with their expenses. (credit: modification of “Balance Swing Equality” by “Mediamodifier”/Pixabay, CC0)

As president of the Accounting Club, you are working on a fundraiser selling T-shirts on campus. You have gotten quotes from several suppliers ranging from $8 to $10 per shirt and now have to select a vendor. The prices vary based on whether the T-shirts have pockets, have long sleeves or short sleeves, and are printed on one side or both. You are confident that you can sell them for $15 each. However, the college charges clubs a $100 “student sale” fee, and your T-shirt sales must cover this cost and still net the club enough money to pay for your spring trip

In addition, several of the vendors will give volume discounts—the more shirts you purchase, the less each shirt costs. In short, you need to know exactly which style of T-shirt, vendor, and quantity will allow you to reach your desired net income and cover your fixed expense of $100. You decide on a short-sleeve shirt with a pocket that costs $10 each and that you can sell for $15.

This $5 per shirt “gross profit” will first go toward covering the $100 student sale fee. That means you will have to sell 20 shirts to pay the fee ($100/$5 = 20 shirts). After selling the first 20 shirts, the $5 profit will be available to start paying for the cost of the trip. Your faculty advisor has calculated that the trip will cost $125 per student, and you have 6 people signed up for the trip. This means the sale will need to generate an additional $750 from the sale (6 students × $125). At $5 per shirt you will need to sell 150 shirts to cover the student costs ($750/$5). So, you will need to sell a total of 170 shirts: 20 to cover your fixed cost of $100 and an additional 150 to cover the student’s cost of the trip ($750). What you have just completed is a cost-volume-profit analysis. In this chapter, we will explore how managers can use this type of analysis to make a wide range of decisions about their business operations.

Order a print copy

As an Amazon Associate we earn from qualifying purchases.


This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at
Citation information

© Dec 13, 2023 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.