Yambs Company manufactures and sells a single product. Following data were given: Sales (15,000 units) 600,000.00 Less: Variable Cost 420,000.00 Contribution Margin 180,000.00 Less: Fixed Cost 150,000.00 Profit 30,000.00 Required: Determine the following: Selling Price per Unit Variable Cost per Unit c. CM Ratio What is the monthly break-even point in units sold and in sales pesos? Without doing computations, what is the total contribution margin at BEP?
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.
- Yambs Company manufactures and sells a single product. Following data were given:
|
Sales (15,000 units) |
600,000.00 |
|
Less: Variable Cost |
420,000.00 |
|
Contribution Margin |
180,000.00 |
|
Less: Fixed Cost |
150,000.00 |
|
Profit |
30,000.00 |
Required: Determine the following:
- Selling Price per Unit Variable Cost per Unit c. CM Ratio
- What is the monthly break-even point in units sold and in sales pesos?
- Without doing computations, what is the total contribution margin at BEP?
- Prove that CMRxMSR=NPR
- Barack Co. BEP in sales are P528,000. The variable cost to sales is 60%, while the profit ratio is 8%
Determine the following:
- Fixed cost 2. Actual Sales 3. Profit 4. Margin of Safety 5. Margin of Safety Ratio
- Mahjong Co. produces and sells two products, tables and chairs. Following is next month’s income budget
|
Sales in units |
Chairs |
Tables |
Total |
|
|
600 |
150 |
750 |
||
|
Sales |
P 1,200.00 |
P 187.50 |
P 1,387.50 |
|
|
VC |
1,050.00 |
112.50 |
1,162.50 |
|
|
CM |
150.00 |
75.00 |
225.00 |
|
|
FX |
90.00 |
|||
|
NI |
135.00 |
Required:
- How many units of tables should be sold next month to break even?
- How many units of chairs should be sold to earn a profit of P150
- How many units of chairs should be sold to earn a profit of P100 net of 30% tax?
- Actual operating results for the shop are presented below:
|
S |
250,000.00 |
|
VC |
100,000.00 |
|
CM |
150,000.00 |
|
FX |
120,000.00 |
|
NI |
30,000.00 |
Required:
- Compute the Degree of Operating Leverage Factor
- Using the said concept, how many percent would income increase if the sales increase by 10%?
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