Accountants' Handbook, Volume Two, Special Industries and Special Topics, 12th Edition

Chapter 29

Cost-Volume-Revenue Analysis for Nonprofit Organizations

Jae K. Shim, PhD

California State University, Long Beach

29.1 Questions Answered by CVR Analysis

29.2 Analysis of Revenues

29.3 Analysis of Cost Behavior

(a) Variable Costs

(b) Fixed Costs

(c) Types of Fixed Costs: Program-Specific or Common

29.4 CVR Analysis with Variable Revenue Only

(a) Contribution Margin

(b) Unit CM

(c) CM Ratio

29.5 Break-Even Analysis

(a) Graphical Approach in a Spreadsheet Format

(b) Determination of Target Surplus Volume

(c) Margin of Safety

(d) Some Applications of CVR Analysis and What-If Analysis

29.6 CVR Analysis with Fixed Revenue Only

29.7 CVR Analysis with Variable and Fixed Revenues

29.8 Program Mix Analysis

29.9 Management Options

29.10 Sources and Suggested References

Managers of nonprofit organizations (NPOs) generally are not skilled in financial matters. They often are preoccupied with welfare objectives and ignore the operations efficiency and operating cost controls. There are nine questions that nonprofit financial managers should address in connection with an organization's financial condition and activity:

1. Do we have a profit or a loss?

2. Do we have sufficient reserves?

3. Are we liquid?

4. Do we have strong internal controls?

5. Are we operating efficiently?

6. Are we meeting our budget goals?

7. Are our programs financially healthy?

8. Are we competing successfully?

9. Is our prioritizing of programs and activities reasonable?

By definition, the goal of a nonprofit ...