BUILDING A PROFIT VOLUME AND
BREAK-EVEN ANALYSIS WORKBOOK
In This Chapter
• EasyRefresher™: Profit Volume and Break-Even Analysis
• Using the Profit Volume and Break-Even Analysis Starter Workbook
• Understanding the Starter Workbook’s Calculations
• Customizing the Starter Workbook
• Charting Profit Volume Analysis Data
Profit volume analysis lets you look at the revenues, costs, and profits of a business for
a range of business volumes, or revenues. By using profit volume analysis, you can see how
sensitive profits are to changes in business volume and where break-even points occur.
The profit volume and break-even analysis starter workbook described in this chapter pro-
vides a framework to use in performing profit volume analysis and in calculating break-even
points. This chapter shows how to use the workbook and modify it. In addition, this chap-
ter includes two charts useful in portraying profit volume and break-even analysis data.
MBA’s Guide to Microsoft Excel 2000
Profit Volume and Break-Even Analysis
Profit volume analysis, sometimes called cost-profit-volume analysis, is the process of calcu-
lating the profits of a business at different volumes, or revenue levels. Break-even analysis,
a component of profit volume analysis, is simply the calculation of the revenue level at which
a business shows neither a profit nor a loss.
Generally, profit volume analysis involves five steps. First, set a range of business volumes
for which you examine costs and profits. This step is probably one of the most critical be-
cause all the information you input—unit sales price, variable costs, fixed costs, and costs
varying with profits—is usually valid only over a limited range of volumes. By carefully
considering the relationships between costs and changes in volume over a specific range,
you can increase the accuracy of your analysis.
Second, calculate the unit sales price, the amount for which you sell your product or ser-
vice. For example, if you build and sell single-family home