CVP ANALYSIS

IN ONE PRODUCT
 Nicolas Company produces a product that sells for P800.00. The variable cost is P350 for direct materials, P200 for
labor, P50 for variable overhead and P30,000 for fixed overhead. The units sold for the month is 500 units. Find the a)
Break Even Point in Units and b) Break Even Point in Pesos.

A. Break Even Point (Units) = Total Fixed Cost

Contribution Margin per Unit BEP (Units) = P30,000
P200

= Sales Price – Variable Cost per Unit BEP (Units) = 150 units
= P800 – P600
= P200

B. Break Even Point (Pesos) = Total Fixed Cost

Contribution Margin Ratio
BEP (Pesos) = P30,000
25%
= Contribution Margin per Unit / Sales Price per Unit
BEP (Pesos) = P120,000
= P200 / P800
= 25%
Quantity Sales Variable Fixed Total Profit
Cost (Loss) If a statement is prepared
for the break even sales, it
50 x 800 40,000 30,000 30,000 60,000 (20,000) will appear as:

100 x 800 80,000 60,000 30,000 90,000 (10,000)

150 x 800 120,000 90,000 30,000 120,000 0

Sales P120,000
Variable Cost (150 x 600) (90,000)
Contribution Margin P 30,000
200 x 800 160,000 130,000 30,000 150,000 10,000 Fixed Cost 30,000
Net Income 0
250 x 800 200,000 150,000 30,000 180,000 20,000

300 x 800 240,000 180,000 30,000 210,000 30,000

NO PROFIT
350 x 800 280,000 240,000 30,000 270,000 40,000 NO LOSS
SALES AND UNITS WITH DESIRED PROFIT
The company desires a profit of P120,000.

Sales (units)= Total Fixed Cost + Desired Profit

Contribution Margin per Unit
CHECKING:
Sales (units) = P30,000 + 120,000
200 Sales P 600,000
Variable Cost (600,000 x 75%) (450,000)
Sales (units) = 31,000 units Contribution Margin 150,000
Fixed Cost (30,000)
Net Income P 120,000

Sales (pesos)= Total Fixed Cost + Desired Profit

Contribution Margin Ratio

Sales (pesos) = P30,000 + 120,000

25%

Sales (pesos) = P600,000

 Nicolas Company produces a product that sells for P800.00.
The variable cost is P350 for direct materials, P200 for
labor, P50 for variable overhead and P30,000 for fixed
overhead. The units sold for the month is 500 units.

Effect of Change in Sales Effect of Change in Fixed Effect of Change in Variable

Price Cost Cost Per Unit

The selling price increased to The fixed cost increased to The variable cost increased to
P850. P50,000. P650 per unit.

BEP (units) = Total Fixed Cost BEP (units) = Total Fixed Cost BEP (units) = Total Fixed Cost
CM per Unit CM per Unit CM per Unit

BEP (units) = P30,000 BEP (units) = P50,000 BEP (units) = P50,000

P850 – P600 P800 – P600 P800 – P650

BEP (units) = 120 units BEP (units) = 250 units BEP (units) = 200 units
 MARGIN OF
SAFETY Using the previous illustration, if the current sales is
500 units and the BEP is 150 units;
Margin of Safety in Units

Margin of Safety = Current Sales – BEP Sales

Margin of Safety = 500 units – 150 units
Margin of Safety = 350 units Margin of Safety in Pesos

Margin of Safety = 350 units x P800

Margin of Safety Ratio
Margin of Safety Ratio = Margin of Safety
Total Sales
Margin of Safety Ratio = P280,000
P400,000
Margin of Safety = P280,000
Margin of Safety = P400,000 –
P120,000
Margin of Safety = P280,000

Margin of Safety Ratio = 70%