Concept Introduction:
Cost Volume Profit (CVP) Analysis:
The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.
Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:
Contribution margin = Sales - Variable cost.
Similarly contribution margin ratio = Contribution/sales
Breakeven Point:
The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no
Margin of Safety:
Margin of safety is sales over and above the breakeven level. Margin of safety can be calculated as dollar amount and in units as follows:
To Calculate:
The Margin of safety % for the year 20Y8
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Survey of Accounting (Accounting I)
- Q8/ By the graphical(chart) method and for the data (F.C=85, V.C=185, Selling price per unit = 3$, number of units = 50), Find : 1- breakeven point in unit. 2- breakeven point in sales. 3- profit margin. 4- loss margin. 5- total cost.arrow_forwardIf Actual sales are OMR 490000, Total Fixed costs OMR 135000, Selling price per unit OMR 50, and Variable cost per unit OMR 35, which of the following shows Margin of Safety (MS) as amount and as percentage (on sales)? Soloctarrow_forwardGuiller Company's projected profit for the coming year follows PER UNIT P 20.00 12.00 P 8.00 TOTAL Sales Variable costs Contribution margin P2,480,000 1,488.000 992,000 626.400 P 365,600 Fixed cost Operating incomearrow_forward
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- Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? a. costs and expenses ratio b. contribution margin ratio c. margin of safety ratio d. profit ratioarrow_forwardThe sales price for a product provides a gross profit of 14% of sales price. What is the gross profit as a percentage of cost? 14%. 16.28%. 12.28%. Not enough information is provided to determine.arrow_forwardWhat ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? A. Margin of safety ratioB. Contribution margin ratioC. Costs and expenses ratioD. Profit ratioarrow_forward
- Q.3.5 Complete the following table by filling in the missing amounts: (6) Mark-up on Cost Price Profit Selling Price Cost (excluding VAT) (excluding VAT) (excluding VAT) 25% 1 000 100% 6 000 1 500 2 500arrow_forwardWhich of the following equations is correct for determining the required sales in units to generate a targeted amount of pre-tax income (πB) under the equation method (where Q = sales in units, F = total fixed costs, πB = pre-tax profit, v = variable cost per unit, and p = selling price per unit)?arrow_forwardDistinguish between gross profit as a percentage of costand gross profit as a percentage of sales price. Convertthe following gross profit percentages based on cost togross profit percentages based on sales price: 25% and331/3%. Convert the following gross profit percentagesbased on sales price to gross profit percentages based oncost: 331/3% and 60%arrow_forward
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