COST-VOLUME PROFIT ANALYSIS

Assumptions:
CVP assumes the following:
 Constant sales price
 Constant variable cost per unit
 Constant total fixed cost
 Constant sales mix
 Units sold equals units produced

FIXED COST: No matter how much volume the business produces,

it will have to pay these cost.

Routine Expenses Cost per year Cost for 5 years

Advertising expense 25,000.00 125,000.00
Utilities expense 37,800.00 189,000.00
Miscellaneous Expense 2,250.00 11,250.00
Rent Expense 126,000.00 630,000.00
Repair and Maintenance 1,312.85 6,564.25
Regulatory Expenses 10,992.00 54,960.00
Depreciation Expense - Equipment 8,811.44 44,057.20
Depreciation Expense - Furniture & Fixture 4,317.05 21,585.25
Total 216,483.34 1,082,416.70

Personnel Cost Cost per year Cost for 5 years

Manager 144,480.00 722,400.00
Assistant Manager 134,848.00 674,240.00
Florist 134,848.00 674,240.00
Cashier 120,400.00 602,000.00
Tele-worker 120,400.00 602,000.00
Workers 361,200.00 1,806,000.00
Total 1,016,176.00 5,080,880.00

INITIAL INVESTMENT:
Renovation 131,618.00
Installation cost 5,000.00
Equipment 106,970.00
Furniture and Fixtures 29,451.32
Training expense 20,000.00
Production supplies 11,613.70
Cleaning supplies and materials 8,355.81
Other supplies 11,202.90
Total 324,211.73
Total Fixed Cost 1,556,871.07
VARIABLE COST:
Expenses related to V olume of Production Cost per year Cost per unit Cost for 5 years
Box 137,256.00 24.00 686,280.00
Ribbon 13,960.00 2.44 69,800.00
Fairy Light 50,856.00 39.00 254,280.00
Flower 62,200.00 25.00 311,000.00
Bouquet Wrap 124,400.00 22 622,000.00
Shredded Paper 12,040.00 2.11 60,200.00
Zink Paper 2,730.00 0.48 13,650.00
Photo Paper 6,962.00 1.22 34,810.00
Scented paper 7,336.00 1.28 36,680.00
Balloons 3,900.00 30.00 19,500.00
Staple Wire 1,800.00 0.31 9,000.00
Tape 3,000.00 0.52 15,000.00
Epson 3110 Refill Ink 4,280.00 0.75 21,400.00
Total 430,720.00 148.86 2,153,600.00

FINDING THE BREAKEVEN POINT

1,556,871.07
301.14 unit margin contribution
5,169.98 Breakeven sales in units

2,326,492.59 Breakeven sales in pesos

Break-Even Analysis
8,000,000.00

7,000,000.00
Breakeven in units 5169.98
6,000,000.00 Breakeven in pesos 2,326,492.59
5,000,000.00

4,000,000.00

3,000,000.00

2,000,000.00

1,000,000.00

0.00
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000

Total Cost Sales

The assumptions of the CVP Model yield the following linear equations for total cost and total
revenue (sales):
Total cost = Fixed cost + (Variable cost per unit * no. of units)
Total Revenue = Sales price * no. of units

 The break-even point in pesos that is computed will be able to cover the total cost of the
business.
 Therefore, each unit sold above the break-even point will produce a profit equal to its
contribution margin, and each unit sold below the break-even point will generate a loss equal to
its contribution margin.