Quiz #2

This video is very informative since the speakers explained the topic CVP Analysis excellently.
The speaker in the video discussed the concept of CVP analysis which refers to the relationship
among the cost which is the variable of variable cost, fixed cost, the unit sold, and profit. The
speaker also explained the four CVP analysis formulas these are the following: Break-even point,
Desired profit, Margin of safety, and Sensitivity analysis.
The first CVP formula that the speaker discussed in the video is the break-even point which
refers to the point that the costs and profits of the business are the same. This can be calculated in
either pesos or units. To calculate pesos, divide fixed costs by the contribution margin ratio.
To calculate units, divide fixed costs by the contribution margin per unit. A low break-even point
is better compared to a high break-even point because a low break-even point implies that fewer
products must be sold to cover the costs.
The speaker went on to describe the second CVP formula, which is desired profit. This can be
computed in units or pesos. The computation for units is fixed cost plus desired profit divided by
contribution margin per unit. To calculate pesos, fixed cost plus desired profit divided by
contribution margin ratio.
The third CVP formula that the speaker explained is the margin of safety this can be in units,
pesos, or ratios. The computation for margin of safety in units is sales in units minus break-even
in units; The computation of margin of safety in pesos is sales in pesos subtract break-even point
in pesos; The computation of margin of safety in ratio is margin of safety divided by sales. The
profit is better when there is a higher margin of safety.
The fourth CVP formula that the speaker discussed is the sensitivity analysis which changes the
variables and sees the effect on the profit of the business. There are five variables that the
business can change these are the following: selling price, variable costs, fixed costs, volume,
and sales mixes which refer to the amount of each product that the business sells with overall
sales.
After going over the CVP formulas, the speaker responds to some of the questionnaire's
questions. Overall, I learned a lot from watching the video, and the speaker made the Cost-
Volume-Profit Analysis concept simple to understand.