If a company’s CVP analyses showed it was not operating at break-even, where on the financial statements might one be able to see this impact (i.e., specific line items on the statements)?

Cost-volume-profit (CVP) analysis helps in studying the impact on cost and profit when the volume of sales units is theoretically changed and breakeven analysis is one of main topic of CVP analysis here.

To determine whether or not the company is at profit or not, we can simply see its Operating profits present in the Income statement to understand whether or not the company is at breakeven (No profit and loss position). Furthermore, if there is profit then the company is above the breakeven position and if the company is at loss then it is below breakeven position.

This is because the company that is sufficiently producing contribution to offset the fixed cost is always at profit and vice versa.

Tundexi Tundexi · Answer 2 · 2021-12-07T15:02:04+01:00

One will be able to see the impact on the financial statements through the Lower sales, Dipping Gross Profit, Negative Net Income, Lower Retained Earnings etc

If the CVP analysis shows that the firm is not operating at break-even, then, the impact could be seen on various aspect of the financial statements:

Lower Sales: The Company's sales of the current year would be lower compared to previous year.

Dipping Gross Profit: The gross profit would be lower to the period costs/expenses.

Negative Net Income: The net income will shows a negative balance.

Lower Retained Earnings: The Retained Earnings will show lower balance against previous year and may display a negative balance.

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