Advanced Cost Management Accounting Cost Volume Profit Analysis
- Slides: 13
Advanced Cost & Management Accounting Cost Volume Profit Analysis
Cost Volume Profit Analysis (CVP) CVP is a relationship of four variables: Sales Variable cost Fixed cost Net income Volume Cost Profit
Contribution Margin = Sales – Variable cost
Example 90 units of product “PR” is sold for Rs. 100 per unit. Variable cost relating from production and selling is Rs. 75 per unit and fixed cost is Rs. 2250.
Sales Less: Variable cost Contribution margin Less: Fixed cost Profit / Loss *** (***) ***
Solution Sales (90 x 100) Variable cost (90 x 75) Contribution margin Fixed cost Profit / Loss Sales increased by 10 units: Rs. 9, 000 (10 x 100) 1, 000 (6, 750) (75 x 10) (750) 2, 250 (2, 250) 0 0 250 Final addition 10, 000 (7, 500) 2, 500 (2, 250) 250
B-Impact of increase in sales price by 10 % Sales 100 x Rs 110 Variable cost 100 x Rs. 75 Contribution margin Fixed cost Profit 11, 000 (7, 500) 3, 500 (2, 250) 1, 250 Increase Rs. 1, 000
C- Impact of decrease in sales price by 10 % Sales 100 x Rs 90 Variable cost 100 x Rs 75 Contribution margin Fixed cost Loss 9, 000 (7, 500) 1, 500 (2, 250) 750
D- If Sales increases by 50% Sales 150 x Rs 90 Variable cost 150 x Rs 75 Contribution margin Fixed cost Profit/ Loss 13, 500 (11, 250) 2, 250 (2, 250) 0
E- Sales volume increases up to 100% by 10% decrease in sales price Sales 200 x Rs 90 18, 000 Variable cost 200 x Rs 75 (15, 000) Contribution margin 3, 000 Fixed cost (2, 250) Profit 750
F-Sales volume increases by 100% and fixed cost also increases (step fixed cost) up to Rs. 2, 500 Sales 200 x Rs 90 18, 000 Variable cost 200 x Rs 75 (15, 000) Contribution margin 3, 000 Fixed cost (2, 500) Profit 500
G- Impact of increase in variable cost per unit by 20% Sales 200 x Rs 90 Variable cost 200 x Rs 90 Contribution margin Fixed cost Loss 18, 000 (18, 000) 0 (2, 500)
Sales – Variable cost = Contribution margin + Variable cost = Sales Contribution margin – Fixed cost = Profit + Fixed cost = Contribution margin Sales - Variable cost = Fixed cost + Profit Sales Variable cost Contribution margin Fixed cost Profit / Loss *** (***) ***
- The relative proportion of variable fixed or mixed
- Break even point formula in dollars
- Cvp analysis assumptions
- Cost volume profit analysis graph
- Objectives of cvp analysis
- Normal profit economics
- Economic profit vs accounting profit
- Activity based management ppt
- Role of management accounting ppt
- Cost volume profit
- Contribution margin per unit formula
- Oracle advanced cost accounting
- Post acquisition profit is which profit
- Profit volume graph