Management Accounting 1.

1/2019/M

Formulas of Cost Volume Profit (CVP) Analysis

❖ Cost Behavior:
✓ High-Low Method
Rise High Cost − Low Cost
• Variable Cost = Run = High Unit − Low Unit

❖ Cost Formula, Y = a + bx
✓ Total Cost = Fixed Cost + Variable Cost
✓ Total Cost = Fixed Cost + (Variable Cost Per Unit x Units)
✓ Fixed Cost = Total Cost – (Variable Cost Per Unit x Units)

Contribution Margin/unit Total Contribution Margin

❖ Contribution Margin Ratio = or
Selling Price/unit Sales

❖ Equation and Formula Method for Attaining Target Profit

✓ Equation Method:
• Profit = (Unit Contribution Margin x Units) – Fixed Cost
• Profit = (Contribution Ratio x Sales) – Fixed Cost
✓ Formula Method:
Target Profit + Fixed Cost
• Unit Sales to attain Target Profit = Contribution Margin/unit

❖ Break Even Point (BEP) Calculation

Fixed Cost
✓ BEP in Unit = Contribution Margin/unit

Fixed Cost
✓ BEP in Revenue (Monetary Value) = Contribution Margin Ratio

❖ Format of Income Statement

Sales XXXXX
Variable Expenses (XXXXX)
Contribution Margin XXXXX
Fixed Expenses (XXXXX)
Net Operating Income XXXXX