CVP Analysis:

Mahjong Corporation recently hired Ikawna, a newly passed CPA. He was

assigned to do a CVP analysis and make simulations on the company's
revenue and cost data under various scenarios. The following data were
obtained from the last month's operation:

Liang Liong
Sales 1,000,000.00 500,000.00
Variable Cost 600,000.00 100,000.00
Contribution Margin 400,000.00 400,000.00
Direct Fixed Cost 200,000.00 150,000.00
Profit 200,000.00 250,000.00
10.00 25.00 SP
Sales Volume 100,000 20,000
Mahjong is known for selling high-quality action figures. Their mainstream
products recently were Liang and Liong. Price increase is not to be
expected in the coming months. Ikawna was asked to determine the
following for both products:

REQUIRED: Liang Liong

a. Contribution margin per unit 4 20
b. Contribution margin ratio 40.00% 80.00%
c. Monthly break-even point in units 50,000 7,500
d. Monthly break-even point in peso 500,000.00 187,500.00
e. Break-even ratio 50.00% 38.00%
f. Margin of Safety in Units 50,000 12,500
g. Margin of Safety in Peso 500,000.00 312,500.00
h. Margin of Safety Ratio 50.00% 62.50%
i. Operating Leverage Factor 2 1.6
a. Contribution margin per unit
Liang Liong
10.00 25.00 e. Break-even ratio
CM/u = SP - VC/u
6.00 5.00
4.00 20.00
BEPR =

CM 400,000.00 400,000.00
CM/u =
Su 100,000 20,000

4.00 20.00

f. Margin of Safety in Units

b. Contribution margin ratio
MSu =
CMR = CM 400,000.00 400,000.00
S 1,000,000.00 500,000.00

0.40 0.80
g. Margin of Safety in Peso

c. Monthly break-even point in units

MSp =

FxC 200,000.00 150,000.00

BEPu =
CM/u 4.00 20.00
MSp =
50,000 7,500

d. Monthly break-even point in peso h. Margin of Safety Ratio

FxC 200,000.00 150,000.00

BEPp = MSR =
CMR 0.40 0.80

500,000.00 187,500.00
6,000,000.00 2,250,000.00
MSR =

i. Operating Leverage Factor

DOL or OLF =
 Liang Liong
eak-even ratio

BEPu 50,000.00 7,500.00

Su 100,000.00 20,000.00

0.50 0.38

argin of Safety in Units

100,000 20,000
Su - BEPu
50,000 7,500
50,000 12,500

argin of Safety in Peso

1,000,000 500,000
Sp - BEPp
500,000 187,500
500,000 312,500

500,000.00 312,500.00
Su x SP

argin of Safety Ratio

MSp 500,000.00 312,500.00

Sp 1,000,000.00 500,000.00

0.50 0.63

1 - BEPR
0.50 0.63

erating Leverage Factor

Total CM 400,000.00 400,000.00

Profit before tax 200,000.00 250,000.00

2 1.6
 1 1
0.50 0.63

2.0 1.6