Chapter 1

Profit-Volume-Cost Analysis

IN THIS CHAPTER

check Understanding how profit-volume-cost analysis works

check Computing break-even points

check Performing profit-volume-cost analysis with real QuickBooks data

check Dealing with some minor conundrums

check Working with the Profit-Volume-Cost Analysis workbook

Profit-volume-cost analysis is a powerful tool that estimates how a business’s profits change as its sales volumes change, as well as break-even points. (A break-even point is the sales revenue level that produces zero profits.)

Profit-volume-cost analysis often produces surprising results. Typically, the analysis shows that small changes in a business’s sales volume produce big changes in profits.

Tip Hotels and airlines are types of businesses that often see surprising fluctuations in their profits based on relatively modest changes in their sales revenue. Indeed, now that you know this, you’ll probably ...

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