n Pan Sdn Bhd produces and sells plastic plates to retailers for RM3 per unit. The variable RE b. How many plates must be sold in order to earn a profit of RM66,000? The fixed manufacturing cost amounted to RM120,000 per year. Total fixed administrative cost Calculate the margin of safety if the company expects to sell 200,000 units of plastic plates. Calculate the number of plastic plates that must be sold in order to break even. Pan cost Direct materials RM Direct labour 0.40 Variable overheads 0.70 Selling expense 0.50 0.20 is RM30,000. Required: a. C. ne Sdn Bhd plans to sell a health produ
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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