1 Cosm a. Determine the monthly break-even point in units and in sales value. accountant of Cosmo Sdn Bhd, analyse the project of the following aspects. and RM8 respectively. The projected fixed cost is RM200,000 per month. As the management The Pro3 is to be sold in 500 ml bottles. The selling price and variable cost per bottle is RM10 product called Pro3 to shopping centres in the city. Required: b. Calculate the company's projected profit if: i. 500,000 bottles are sold. i 300,000 bottles are sold, and the shopping centres are given a discount of RM1 per bottle for every bottle sold in excess of the break-even point.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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