Scribd Logo
Upload

Welcome to Scribd!

  • 6 views

    Ms03 - Cvp Analysis

    Uploaded by

    alimurungg

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Ms03 - Cvp Analysis

    Uploaded by

    alimurungg
    6 views1 page

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views1 page

    Ms03 - Cvp Analysis

    Uploaded by

    alimurungg

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 1

    1.2.

    2 Cost-volume profit (CVP) analysis


    CVP Analysis systematic examination of the relationships among revenues, costs, activity levels or volume, and profit. CVP GRAPH
    Profit (and CVP analysis) is affected as changes occur in any, some or all of the following:
    Factors that affect
    (1) Output/Activity level (3) VC per unit (5) Product Mix
    profit
    (2) Selling Price (4) Total FC
    Break-Even Point - point of activity level (sales volume or pesos) where total revenue = total costs
    (BEP) - meaning there is NO PROFIT OR LOSS
    (a) All costs are classifiable as fixed or variable
    (b) Total FC and VC per unit are constant within the relevant range
    (c) Revenue change in proportion to volume and selling price are constant
    Assumptions in
    (d) Constant product mix
    CVP Analysis
    (e) No significant change in inventory level during the period
    (f) Behavior of total revenue and total costs will be linear within the relevant range
    (g) Deterministic and appropriate data can be found PROFIT-VOLUME GRAPH
    Basic Formulas: a graphic that shows the earnings (or losses) of
    = SP per unit - VC per unit = VC per unit / SP per unit a company in relation to its volume of sales
    (c) VC ratio
    = Total CM / Unit sales = Total VC / Total peso sales
    (a) CM per unit
    = Total FC / BEP units
    = Profit / Margin of safety units
    = CM per unit / SP per unit
    = Total CM / Total sales in pesos
    (b) CM ratio = Total FC / BEP pesos
    = Profit / Margin of safety pesos
    = 1 - VC ratio
    Required sales in units or Pesos if with target profit: With sales mix:

    OR
    🔹 desired profit is = BEP sales or units +
    (a) BEP in units
    "before tax" or Pesos
    MOS sales or units

    🔹 desired profit is (b) Weighted


    "after tax" Ave. CM in units

    a "what if" technique that examines impact of changes


    on an answer (c) Weighted
    Senstivity Analysis
    Ave. CM %
    Sensitivity = % change in output / % change in
    - amount by which actual or planned sales may be reduced without incurring a loss.
    - sales beyond or in excess of BEP
    MOS Pesos = Total peso sales - BEP sales MOS ratio = MOS pesos / Total peso sales Profit = MOS units x CM per unit
    Margin of Safety
    = Profit / CMR = MOS units / Total unit sales = MOS pesos x CMR
    MOS Units = Total unit sales - BEP units = Net Profit Ratio / CMR Net Profit Ratio or
    Return on sales = MOS ratio / CMR
    = Profit / CM per unit
    Degree of DOL = Total CM / Operating Profit
    financial ratio that mesaures sensitivity of a company's operating income to its sales.
    Operating Leverage = % change in profit / % change in sales
    level of sales volume at which total cost and profit are the same under decision alternatives
    Indifference Point
    Indifference Point = Differential FC / Differential VC per unit
    Other scenarios in
    Step Fixed Cost does not change within a certain high and low thresholds of activity, but will change once these thresholds are breached
    CVP Analysis
    Scenario Analysis /
    assesses the effect of changing some or all of the CVP variables at the same time.
    Multiple Drivers

    You might also like