Cost-Volume-Profit Analysis:

 Profit volume analysis, sometimes called as cost-profit-volume analysis, is a method to determine the profits connected with a business at different volumes, or revenue levels. The kinds of information derived from cost-volume-profit analysis are illustrated through a simple business situation. Quality Ice Cream Company sells ice creams of several flavors through a chain of stores distributed during a large city. Volume of business is measured in units of liters of ice-cream sold. Company purchase ice cream at a price of Rs. 35 per liter from several dairies. Retail sales prices vary based upon the quantity purchased by the customer, but the revenue get per liters of ice cream sold averages Rs. 50 per liter and remains constant, that means does not vary with store or from period to period. Income taxes are not included in the cost because they are neither fixed costs nor variable costs. Income taxes based upon the amount of profit or income before taxes, rather being fixed or depend with the volume sold or manufactured. Often they are avoids in cost-profit-volume analysis and profit is defined in terms of operating income or income before the deduction of income taxes.