Selling price per unit Direct material .cost per unit Direct labour cost per unit Fixed overheads Variable overheads@ 60% on direct labour Trade discount Rs.25 24,000 If sales are 15% and 20% above the break-even volume, determine the net profits. [Ans. BEP 3,000 units; (1) Rs. 3,600: (7) Rs. 4,8001 4% (CA. Inler)
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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5. From the following data, you are required to calculate the break-even point and net sales valuc at this point
Selling price per unit
Direct material cost per uni
Direct labour cost per unit
Fixed overheads
Variable overheads@ 60% on direct labour
Trade discount
Rs.25
24,000
If sales are 15% and 20% above the break-even volume, determine the net profits.
[Ans. BEP 3,000 units; (1) Rs. 3,600; () Rs. 4,800]
4%
(CA. Inter)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc7e76cdb-ad3b-46d8-b98e-a0a761fb2897%2F9db1943a-d4b2-487f-948e-8d60ce6a1294%2Fmapxi_processed.jpeg&w=3840&q=75)
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