Cost Volume Profit Analysis

• used to determine how changes in costs and volume affect a

company's operating income and net income.

Elements of CVP Analysis:

• Sales ( Selling Price/Unit Volume)
• Total Fixed Cost
• Variable Cost per Unit
• Sales mix
Variable Costing Income
Statement
Formulas
• Break Even Point Analysis
Profit = 0
Sales = Variable cost + Fixed Cost
Contribution Margin = Fixed Cost
Therefore:
Break Even Point in Units = Fixed Cost/Contribution Margin per unit

Break Even Point in Pesos = Fixed Cost/Contribution Margin Ratio

where: Contribution Margin Ratio = Contribution Margin/Sales
Formulas
• Desired Profit

Desired Profit in Units = Fixed Cost+ Desired Profit

Contribution Margin per unit

Desired Profit in Pesos = Fixed Cost+ Desired Profit

Contribution Margin Ratio
Formulas
• Margin of Safety

MOS in Units = Sales (units) – BEP ( in units)

MOS in Pesos = Sales (peso) – BEP (peso)
MOS Ratio = Margin Safety (peso)/ Sales (peso)
Sample Problem
• Margin of Safety

MOS in Units = Sales (units) – BEP ( in units)

MOS in Pesos = Sales (peso) – BEP (peso)
MOS Ratio = Margin Safety (peso)/ Sales (peso)

BESR= BES/Sales
MOSR= 1- BESR
BESR= 1-MOSR
1 = MOSR+BESR