Financial Modeling in Non-Profit Organizations: The Cost-Volume-Profit Approach

Abstract

The ability of an organization to test the interactions of economic variables in a variety of setting is important in effective decision-making and ultimately profitability and survival. This paper posits the use of Cost-Profit Volume (CPV) analysis in this regard and applied it to non-profit organization. Using a case study approach, the study demonstrates practically the application of CVP framework to decision problems. Thereafter, primary data were collected by means of questionnaire and analyzed using frequency percentage to investigate why cost/management accounting decision frameworks in general are not popular among non-profit organizations in Nigeria. The traditional technique of CVP analysis including its assumptions and limitations were addressed.  The paper suggested the use of Activity-Based Costing as a potent means of overcoming the perceived limitations of the traditional CVP analysis.

Keywords: CVP analysis, Non-profit organizations, Activity-Based-Costing, Financial Modeling.