Cost volume profit analysis scrutinizes the relationship between changes in activity and changes in total sales revenue, cost and profit. It may provide very useful information particularly for a business that is commencing operations or facing difficult economic conditions. Cost volume profit analysis determines how many units of a product must be sold so that the business reaches its break-even point. It allows the business to consider the effect on profits of various changes in operating costs and revenues such as a reduction in selling price or an increase in fixed cost to determine the sales volume required to achieve a specific profit level and to establish the amount by which the current sales level can decrease before losses are incurred.