Cost Volume Profit Calculator

Cost Volume Profit Formula

The formula to calculate the Cost Volume Profit (CVP) is:

\[ \text{CVP} = \text{RP} \times \text{U} - \text{TC} \]

Where:

• CVP is the Cost Volume Profit in dollars ($)
• RP is the Retail Price in dollars ($)
• U is the number of units sold
• TC is the total costs, including both fixed and variable costs in dollars ($)

How to Calculate Cost Volume Profit?

To calculate the Cost Volume Profit, follow these steps:

1. Multiply the retail price (RP) by the number of units (U): This gives the total revenue generated from selling the units.
2. Subtract the total costs (TC): Deduct the combined fixed and variable costs from the total revenue to get the Cost Volume Profit.

Example Calculation

Let's say your retail price is $50, you sold 100 units, and your total costs (fixed plus variable) amount to $2,000.

\[ \text{CVP} = 50 \times 100 - 2000 = 5000 - 2000 = 3000 \text{ dollars} \]

So, your Cost Volume Profit would be $3,000.

This calculation helps businesses to understand how changes in sales volume, costs, and price impact profitability, allowing for more informed decision-making regarding pricing, production, and sales strategies.