What is the primary focus of cost-volume-profit analysis?

Cost-volume-profit analysis is primarily concerned with understanding how a business's costs, the volume of products sold, and their profit margins interact. This analytical tool helps managers make informed decisions by illustrating how changes in costs and volume impact profits.

By focusing on the relationships among fixed and variable costs, sales prices, and sales volume, managers can determine the break-even point—the level of sales at which total revenues equal total costs. This analysis allows businesses to assess how different levels of activity affect profitability, enabling them to set sales targets, make pricing decisions, and evaluate the feasibility of new products or services.

Ultimately, the goal of cost-volume-profit analysis is to provide insights that support strategic planning and financial forecasting, making it an essential tool for managerial decision-making.