You are on page 1of 2

CVP Analysis

1. Cosmo Sdn Bhd plans to sell a health product called Pro3 to shopping centres in the
city. The Pro3 is to be sold in 500ml bottles. The selling price and variable cost per
bottle is RM10 and RM8 respectively. The projected fixed cost is RM200000 per month.
As the management accountant of Cosmo Sdn Bhd, analyse the project of the following
aspects.

Required:
a. Determine the monthly BEP in units and in sales value.
b. Calculate the companys projected profit if:
i. 500000 bottles are sold.
ii. 300000 bottles are sold and the shopping centres are given a
discount of RM1 per bottle for every bottle sold in excess of the
BEP.

2. In 2014, Adek Sdn Bhd made a sale of RM1,000,000 for three of its products A, B,
and C with a sales mix of 50%, 20% and 30% respectively. The fixed cost is
RM20,000 per month. The production and sales information of these three products
are as follows:
Product A B C
Total cost/unit 28 40 30
(RM)
Fixed cost/unit 25% of total 20% of total 30% of total
cost cost cost
Sales price/unit 30 45 35
(RM)

Required:
a. Determine the companys break-even point (in sales value) and margin of safety
(in sales value) for the year.
b. The projected sales for the following year for products A, B, and C are
RM700,000, RM500,000 and RM800,000 respectively. Calculate the revised
break-even point (in sales value)

3. Addin Pottery Bhd situated at Subang Bistari produces a line of vases. The vases
are produced mainly for the local market. The production and sales level for the past
two months is as follows:
1,000 vases 2,000 vases
Administration 4,000 4,000
Indirect labour 6,500 9,500
Power 800 1,000
Rental 1,400 1,400
Selling and distribution 4,500 6,500

1
Direct labour 15,000 25,000
Factory supplies 1,500 2,500
Direct materials 30,000 50,000
Electricity 500 500
Total cost 64,200 100,400

The production and sales level of Addin Pottery Bhd ranges between 1,000 and 2,000
vases per month. The average selling price of each vase is RM50.20. The normal
production and sales level of this company is 2,000 vases monthly with a maximum
capacity of 4,000 vases.

Required:
a. Calculate the break even point per annum for Adding Pottery Bhd (in units and in
sales value). Explain your answer.
b. What should be the new selling price for the company to break even if it can only
sell 1,500 vases per month?
c. Based on (a), calculate the expected net profit at a sales level of 3,000 vases
when an additional commission of RM1 per vase is incurred after break even
point.
d. The company is planning to introduce a new product line, a salad bowl, of which
the selling price and variable cost of RM85 and RM45 respectively. The proposed
sales mix line of 3,000 salad bowls will increase the total fixed cost by
RM15,000.
i. Draw the profit volume chart for these two products.
ii. Indicate the BEP (in units) on the chart drawn.
iii. Explain the chart drawn.