COST VOLUME AND PROFIT

(CVP) ANALYSIS

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GRRO
OUUP
P 77
1.
1. S I S M I R A (1 9 1 0 5 3 1 0 29 )
2. RA H I M A H R A M A D H A N I P ( 1 9 1 0 5 36 0 5 0
2.
Managerial uses of CVP analysis
To determine the BEP (break even point)

To achieve the targeted profit before tax and after

tax

Engineering the CVP variables

COST VARIABLE AND PROFIT ANALYSIS DEFENITION

Defenition CVP analysis:

 units that must be sold to break even

 Impact of a given reduction in fixed costs on break-even point

 Impact of an increase in price on profit

 Sensitivity analysis of impact of various price or cost levels on profit

COST FIXED COST

VARIABLE COST

VOLUME SALES VOLUME

PROFIT SALES – FIXED COST – VARIABLE COST

Sales Volume x Selling Price per unit

 The profit target is the target desired by
PROFIT TARGET management during a certain period

TARGET PROFIT BEFORE TAX TARGET PROFIT AFTER TAX

(OPERATING INCOME) (NET INCOME)

ROA = OPERATNG
X 100%
INCOME
OR TOTAL ASET

PROFIT MARGIN = OPERATING INCOME

X 100%
SALES
Calculation

Total asset = 100jt  

Taget Profit 10 % of asset:

Price spidol = 5000 perunit
Variable Cost = 3000
perunit
Fixed Cost = Rp. = 7500 unit
5.000.000 / year
Tax rate = 20%
Profit after tax = 8.000.000
CONTRIBUTION MARGIN CONCEPT

 CM Per Unit is Marginal Income  Total CM is Profit available to cover fixed cost and a profit
Additional Profit for each unit sold Sales = 5000 unit x 1000 = Rp 5.000.000
Cost Variable = 5.000 unit x Rp 600 = Rp (3.000.000)
Selling price per unit 1000 Total CM = Rp 2.000.000
Variable cost perunit (600) Fixed Cost = Rp (500.000)
CM perunit 400 Operation income = Rp 1.500.000

Profit or loss = 400 x – 500.000

If 0 unit = Loss Rp 500.000

If BEP = 500.000
= 1250 unit

IF sales 1251 unit = Profit = 400

1252 unit = Profit = 800
If sales 1249 unit = Loss = 400
 Target Profit After Tax
 CM PER UNIT
9

CM per unit = marginal income (income coeficient)  additional

income for each units sold
Based on previous illustration, what is the profit or loss if sales are:
 600 units => BEP
 601 units => profit $ 75
 599 units => loss $ 75
 No unit sold => loss $ 45.000 (as much as FC)
 700 units => profit: (700 – 600) 75 = $ 7.500

 1 units => loss: 45.000 – 75 =

Formula: Profit (loss) = 75 x – 45.000

 3 kinds of CVP Graph
SALES / COST
SALES / COST
T
TR LINE Profit/loss = 400X – 500.000
TR LINE
h TOTAL COST LINE
Profit

fit
e
TOTAL COST LINE

o
Pr a
.
BEP CM AREA BEP Profit

. 1.250.000 Q SOLD
BEP d 1.250
1.250.000 VC F VARIABLE COST LINE LOSS
TOTAL COST 500.000 LOSS C
500.000 FIXED COST LINE
SS
LO TOTAL COST
FC VC 500.000
Q SOLD
Q SOLD
1.250
*1.250.000 = 1.2501.250
x 1000 *CM > FIXED COST = PROFIT
*Profit = Total sales > Total cost CM < FIXED COST = LOST
*Loss = Total Cost > sales CM = BT = BEP

Harga jual/unit 1000

Variable cost 600

CVP Graph with CM Area Profit and loss graph

*In this graph, We only can see
the range of profit and loss
 Decision Alternative

Example :
Selling price 1000, variable cost per unit 600, fixed cost 250.000 and sold 1000
unit.
Alternative 1 : selling price was reduced by 10% so that sales increased to 1200
units
Alternative 2 : selling price increased by 5% so that sales fell to 900 units
Alternative 3 : advertising cost increased 100.000 so that sales increased to
1500 units
Alternative 4 : advertising cost 100.000 so that selling price decreased 5% and
sales increase 2000 units.
Which allternative will be taken ?
This Time :
CM = 1000 unit x (1000 – 400)=
600.000
Fixed cost = 250.000
Operating Profit = 350.000 (Profit)
Alternative 1 :
CM = 1200 unit x (90% x
400)=432.000
Fixed cost = 250.000
Operating Profit = 182.000 (Profit)
Alternative 2 :
CM = 900 unit x (105% x
400)=378.000
Fixed cost = 250.000
Operating Profit = 128.000 (Profit)
Alternative 3 :
CM = 1500 unit x 400 = 600.000
Fixed cost = 250.000 + 100.000 =
350.000
Operating Profit = 250.000 (Profit)
Alternative 4 :
CM = 2000 unit x (95% x 400 )= 760.000
Fixed cost = 250.000 + 100.000 =
350.000
Operating Profit = 100.000 (Profit)
The alternative taken is alternative 4
because the alternative has a large
profit so that alternative 4
recommended.
 Degree Of Operating Leverage (DOL)

How much profit increases with a slight

increase in sales and how much does profit
decrease with a slight decrease in sales.

  • If DOL increase so that will

easily increase profits
• If DOL decrease so that
would be difficult increase
profit
Example
  :
Sales 50.000.000
Variable cost (20.000.000)
CM 30.000.000
Fixed Cost (25.000.000)
Operating Cost 5.000.000
If sales increases by 10%, so that profit
increase 6 x 10% = 60% or 60% x
5.000.000 = 3.000.000
100% + 10% (increase)

Example :
Sales 52.500.000
Variable cost (21.000.000)
CM 31.500.000
Fixed Cost (25.000.000)
Operating Cost 6.500.000

Total profit = 5.000.000 + 3.000.000

= 8.000.000
 Margin Of Safety (MOS)

Measures how many

percent of sales can fall
but the company does not
loss.

  𝑠𝑎𝑙𝑒𝑠𝑝𝑙𝑎𝑛−𝐵𝐸𝑃 • If MOS increase so that the

𝑀𝑂𝑆= 𝑥100% company will be safe

• If MOS decrease so that the

𝑠𝑎𝑙𝑒𝑠𝑝𝑙𝑎𝑛 company will be risk

THANK YOU