CVP ANALYSIS

Marginal Cost Equation

• Sales= Variable Cost + Fixed Expenses + profit – (Loss)
• Sales - Variable Costs = Fixed expenses + profit – (loss)
• Sales = Fixed cost + desired profit ÷ P/V Ratio

Contribution Margin
• Sales – Variable Costs = Contribution.
• Sales – Marginal Cost = Contribution.
• Fixed expenses + profit – loss = Contribution.
• Sales × P/V Ratio = Contribution.
Profit
• Profit = Sales – Total Cost.
• Total Cost = Fixed cost + Variable Cost.
• Profit = Contribution – Fixed cost.
• Profit = Margin of safety × P/V Ratio.
Contribution/ Sales or Profit/ Volume Ratio
• P/V Ratio = Contribution ÷ Sales × 100
• P/V Ratio = Fixed expenses + profit ÷ Sales.
• P/V Ratio = Sales - Variable Costs ÷ Sales.
• P/V Ratio = Change in profit or Contribution ÷ Sales.
• Variable Costs = Sales (1- P/V Ratio)
• Profit = (Sales × P/V Ratio)– Fixed cost.
• Fixed cost = (Sales × P/V ratio) – profit.
Break Even Point
• BEP (in units) = Total Fixed Expenses ÷ selling Price per unit -
Marginal Cost per unit or
 • BEP (in units) = Total Fixed Expenses ÷ selling Price per unit -
Variable Cost per unit
• BEP (in units) = Total Fixed Expenses ÷ contribution per unit
• BEP ( in ₹) = Fixed expenses ÷ P/V Ratio
• BEP ( in ₹) = Break Even units × selling price per unit
Output or Sales value at which desired profit is earned
• Output/ Sales = Fixed expenses + profit ÷ contribution
Margin of safety
• Margin of safety = Present Sales – Break Even Sales
• Margin of safety = Profit ÷ P/V Ratio