Performance Management · Cost-volume-profit analysis (CVP)

Break-even Charts and Profit-Volume Charts for ACCA PM

Updated 11 October 2026 · Fact-checked

A break-even chart plots total cost and total revenue against volume. The lines cross at the break-even point. A contribution chart shows variable cost first. A profit-volume (PV) chart plots profit or loss against volume, starting at the fixed cost loss and crossing zero at break-even. Read values from the axes.

Understand Break-even Charts and Profit-Volume Charts

A break-even chart shows how revenue, cost and profit change as sales volume changes. Volume (units or sales value) goes on the horizontal axis. Money ($) goes on the vertical axis. You assume costs are either fixed or variable and that selling price and variable cost per unit stay constant.

In the conventional chart you draw a fixed cost line (horizontal), a total cost line (starts at fixed cost on the vertical axis and rises by variable cost per unit) and a sales revenue line (starts at the origin). Where total cost and revenue cross is the break-even point. To the left is the loss area. To the right is the profit area. The gap between sales and the break-even volume is the margin of safety.

The contribution chart (contribution break-even chart) draws the variable cost line first, from the origin. The total cost line is then drawn above it, parallel, starting at the fixed cost level. The gap between the revenue line and the variable cost line is the total contribution. This chart shows contribution directly. The break-even point is the same as in the conventional chart.

The profit-volume (PV) chart plots profit on the vertical axis. Below the horizontal axis is loss. At zero sales the loss equals fixed costs. The line rises with a gradient equal to the contribution per unit (or the C/S ratio if volume is in sales value). It crosses the horizontal axis at break-even. The PV chart shows profit at any volume most clearly, and it is easy to compare products or options.

All charts rest on CVP assumptions. They are linear, usually single-product, and valid only within the relevant range. In the exam you may need to draw a sketch, read a value from a given chart, or explain uses and limitations.

Key rules to remember

Contribution per unit: Selling price per unit − variable cost per unit; This is the gradient of the PV chart line when volume is in units.
Break-even point (units): Fixed costs ÷ contribution per unit; Where total revenue equals total cost, and where the PV line crosses zero.
C/S ratio: Contribution ÷ sales revenue; Gradient of the PV chart when the horizontal axis is sales value.
Break-even point (sales value): Fixed costs ÷ C/S ratio; Use when volume is measured in sales value.
Margin of safety (units): Budgeted sales units − break-even sales units; The horizontal distance between budget and break-even on the chart.
Margin of safety (%): (Budgeted sales − break-even sales) ÷ budgeted sales × 100; Express as a percentage of budgeted sales.
Profit at any volume: Units × contribution per unit − fixed costs; Read from the PV chart as the vertical distance from the axis to the line.
PV chart intercept: Vertical axis intercept = −fixed costs; At zero volume the loss equals fixed costs.

How to solve Break-even Charts and Profit-Volume Charts questions

Use this method for any chart question, whether you must draw, read or comment.

1Identify the chart type asked for: conventional, contribution or PV. Note the units on each axis.
2Calculate contribution per unit, total fixed costs and the break-even point first. These are your check figures.
3Choose a sensible scale and find the key points. For a conventional chart: fixed cost level, total cost and revenue at one output level (usually budget or maximum). For a PV chart: loss at zero volume and profit at one other volume.
4Draw the lines. Revenue starts at the origin. Total cost starts at the fixed cost level. The PV line starts at −fixed costs. Join the points with a straight line.
5Label the axes, the lines, the break-even point and the margin of safety. Show the profit and loss areas.
6Read off the values requested. Draw dotted lines from the intersection to both axes.
7Check that the chart break-even agrees with your calculation.
8If asked for comment, link to uses and limitations: linear assumptions, single product, relevant range, constant mix.

Quickest way: Calculate first, then plot only two points

When to use it: Use this when you have to sketch a chart in Section C under time pressure, or read a given chart in an objective test question.

Calculate break-even units and the profit at budget. Do not rely on reading values from your drawing.
For a PV chart plot just two points: (0, −fixed costs) and (break-even, 0). Extend the line through to budget volume.
For a conventional chart plot revenue and total cost at the budget volume, and fixed cost at zero volume. Draw two straight lines.
Label break-even and margin of safety directly on the sketch.
In a chart-reading objective test, read the axis labels and units before the lines. Then check your reading against a quick calculation.

Common mistakes in Break-even Charts and Profit-Volume Charts

Starting the total cost line at the origin
Students forget that fixed costs exist at zero output.
Fix: Always start total cost at the fixed cost level on the vertical axis. Only the variable cost line (in a contribution chart) starts at the origin.
Starting the PV line at zero instead of −fixed costs
Students copy the revenue line from the conventional chart.
Fix: The PV line starts below the axis at the loss equal to fixed costs. It crosses zero at break-even.
Confusing the gradient of the PV chart
Students think it equals the selling price or the profit margin.
Fix: The gradient is the contribution per unit, or the C/S ratio if the axis is in sales value.
Mixing units and sales value on the axes
Break-even is calculated in units but the chart axis is in $ of sales.
Fix: Check the axis label. Convert break-even units to sales value by multiplying by selling price, or use fixed costs ÷ C/S ratio.
Measuring margin of safety from the wrong point
Students measure from the origin or from the profit figure.
Fix: Margin of safety is the horizontal distance between budgeted sales and break-even sales.
Ignoring limitations when asked to comment
Students describe the chart but never evaluate it.
Fix: Mention linear costs and revenue, fixed costs fixed only within the relevant range, a single product or constant mix, and that production equals sales.

Worked examples

Example 1

A company sells one product at $20 per unit. Variable cost is $12 per unit. Fixed costs are $40,000 per period. Budgeted sales are 6,500 units. (a) Calculate the break-even point in units and in sales value. (b) Calculate the margin of safety as a percentage of budget. (c) State the key points you would plot on a PV chart.

Show the solution

Contribution per unit = $20 − $12 = $8.
Break-even units = $40,000 ÷ $8 = 5,000 units.
Break-even sales value = 5,000 × $20 = $1,00,000. Check: C/S ratio = 8 ÷ 20 = 40%, and $40,000 ÷ 0.40 = $1,00,000.
Margin of safety = 6,500 − 5,000 = 1,500 units. As a percentage of budget = 1,500 ÷ 6,500 × 100 = 23.08%.
Budgeted profit = 6,500 × $8 − $40,000 = $52,000 − $40,000 = $12,000.
PV chart points: (0 units, −$40,000), (5,000 units, $0) and (6,500 units, $12,000). The line is straight with a gradient of $8 per unit.

Answer: Break-even is 5,000 units ($1,00,000 sales). Margin of safety is 1,500 units, or 23.08% of budget. The PV chart starts at −$40,000, crosses zero at 5,000 units and reaches $12,000 profit at 6,500 units.

Example 2

Two products are compared on a PV chart. Product X has selling price $50, variable cost $30 and fixed costs of $60,000. Product Y has selling price $50, variable cost $20 and fixed costs of $1,20,000. Find the volume at which both products give the same profit, and say which product is better above that volume.

Show the solution

Contribution per unit X = $50 − $30 = $20. Contribution per unit Y = $50 − $20 = $30.
Profit X = 20Q − 60,000. Profit Y = 30Q − 1,20,000.
Set equal: 20Q − 60,000 = 30Q − 1,20,000.
Rearrange: 60,000 = 10Q, so Q = 6,000 units.
Check profit at 6,000 units: X = 1,20,000 − 60,000 = $60,000. Y = 1,80,000 − 1,20,000 = $60,000. Both are the same.
On the PV chart the lines cross at 6,000 units. Y has the steeper gradient ($30 against $20), so Y earns more profit above 6,000 units. X is better below 6,000 units because its loss at zero volume is smaller.

Answer: Both products earn the same profit at 6,000 units ($60,000). Above 6,000 units Y is better because of its higher contribution per unit. Below 6,000 units X is better because of its lower fixed costs.

Exam tips

In Section A and B objective questions, read the axis labels first. A PV chart's vertical intercept is the fixed cost loss, and break-even is where the line crosses the horizontal axis.
Always calculate break-even before you draw. A correct calculation protects you if your sketch is imprecise.
In Section C, label everything: axes, lines, break-even point, margin of safety and the profit and loss areas. Unlabelled lines lose marks.
When asked to compare the chart types, say the PV chart shows profit directly, while the conventional chart shows revenue and costs, and the contribution chart shows contribution.
For limitations, give at least three points: linear behaviour, fixed costs fixed only in the relevant range, and single product or constant mix. Link each to the chart's reliability.

Practice questions from Cost-volume-profit analysis (CVP)

Break-even Charts and Profit-Volume Charts in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Break-even Charts and Profit-Volume Charts: frequently asked questions

What is the difference between a break-even chart and a PV chart?

A break-even chart plots revenue and total cost against volume, and profit is the gap between the lines. A PV chart plots profit or loss directly on the vertical axis. The PV chart is simpler to read for profit and easier to use when comparing products or options.

How do you draw a contribution break-even chart?

Draw the variable cost line from the origin. Draw the fixed cost level and add it above the variable cost line to give total cost, which starts at fixed costs. Draw the revenue line from the origin. The gap between revenue and variable cost is the contribution, and the break-even point is where revenue meets total cost.

What does the gradient of a PV chart show?

When the horizontal axis is in units, the gradient is the contribution per unit. When it is in sales value, the gradient is the C/S ratio. A steeper line means profit grows faster as volume rises.

What are the limitations of break-even charts?

They assume constant selling price and variable cost per unit, and fixed costs that stay fixed. They usually cover one product or a constant sales mix, and assume production equals sales. They are valid only within the relevant range, so they are best used for short-term decisions.