Sei sulla pagina 1di 2

CHAPTER 5:

COST VOLUME PROFIT AND BREAK EVEN ANALYSIS

Cost Volume Profit Analysis a systematic examination of the relationships among costs, activity levels or volume, and profit. Cost Behavior - refers to the way costs change with respect to a change in the activity level, such as production or sales volume, labor or machine hours, etc.

Fixed Cost - cost that do not change

Variable Cost cost that change directly

Mixed Cost - Total Cost = Fixed Cost + Variable Cost Fixed Cost = Total Cost Variable Cost

Relevant Range refers to the band of activity within which the identified cost behavior patterns are valid. High-Low Method techniques used to segregate mixed cost components.

Formula:

Variable Rate per Unit = difference in cost (high−low)

difference in activity level

Fixed Cost = Total Cost (Activity Level * VRU)

Check:

Sales = (SP x No. of Units) Less: Variable Cost = (VC x No. of Units) Contribution Margin = (CMU x No. of Units)

Break Even Analysis

BES/units = Fixed Cost

BESR = BES

CMU

sales

BES/pesos = Fixed Cost

CMR

Contribution Margin = Sales – VC or FC + P
Contribution Margin Unit = SP – VC
Contribution Margin Ratio = CMU
SP
Variable Cost Ratio = Variable Cost
Sales
VCR =
VC/u =
Variable Cost
CM
Sales =
Variable Cost Ratio or
CMR

Margin of Safety the difference between actual or planned sales volume and break even sales. It indicates the amount by which actual or planned sales may be reduced without incurring loss.

Margin of Safety = sales break even sales

Margin of Safety Ratio =

MOS

Actual or planned sales

Profit = Operating Income

Actual Sales

Profit before Tax (100%) = Profit after Tax

100%−Tax Rate

+

* Selling Price

RS(u) = FC + Desired Profit

CMU

RS(u) =

FC

RS(p) = FC+Desired Profit

CMR

RS(p) =

FC

CMU

Ex. 5-6 Nancy Corporation Income Statement

 Sales (20,000 units) 300,000 Less: Cost of Goods Sold 180,000 Gross Income 120,000 Less: Selling and Admin Expense 80,000 Operating Income Other Data: 40,000

1

75% of the selling and admin expense is

3 of the cost of goods sold is fixed

variable

Required:

a. Total Fixed Cost = P80,000

180,000 * 1

3 = 60,000

80,000 8 25% = 20,000

b. VC/u and VC Ratio = P9 and 60%

20,000

VCR = 15 = .6 or 60%

VC/u = 180,000

= 9

9

c. CMU and CMR = 6 and 40%

CMU = 15 9 = 6

6

CMR = 15 = .4 or 40%

d. BEP in Units & Pesos = 13,333.33 & P200,000

BEP/u = 80,000 = 13,333.33 BEP/p=

Check:

80,000

6

40%

.4 =200,000

 Sales (13,333.33 * 15) = 200,000 Less: (13,333.33 * 9) = 120,000 Contribution Margin = 80,000 Less: Fixed Cost = 80,000 BEP = 0

e. MOS in units & pesos = 6,666.67 & P100,000

MOS/u = 20,000 13,333.33 = 6,666.67 MOS/p = 300,000 200,000 = 100,000

f. MOSR & BESR = 33.33% and 66.67%

MOSR =

100,000

300,000 = 33.33%

BESR = 200,000

300,000 = 66.67%

g. Required Sales in units and in pesos if the company desires to earn operating income of P60,000 = 23,333.33 and 350,000

RS/u = 80,000+60,000

 RS/p = 80,000+60,000 40% .4 = 350,000 6

Check:

 Sales (23,333.33 * 15) = 350,000 Less: (23,333.33 * 9) = 210,000 Contribution Margin = 140,000 Less: Fixed Cost = 80,000 Profit = 60,000

h. Required Sales in units and in pesos if the company wants to earn profit of 20% of sales = 26,666.67 and P400,000

SP 20% = 3

CMU (6-3) = 3 CMR 40%-20%

RS/u = 80,000

3

= 26,666.67 RS/p =

80,000 .2 = 400,000

20%

i. Assuming that the tax rate is 35%, the required sales in units and in pesos if the company projects income after tax of 65,000 = 30,000 and P450,000

80,000+( 65,000 )

65%

6

= 30,000 x 15 SP = 450,000

j. The profit ratio for the year ended = 13.33%

40,000

300,000 = 13.33 %

5-3 High-Low Method

 Highest Lowest Monthly Cost 24,600 18,750 Machine Hours 32,000 12,500 Difference 5,850 19,500

5,850

Rate of Variability = 19,500 = 0.30 VC/MH

Highest TC = FC + VC FC = 24,600 (9,600 * 0.30) = 15,000 Lowest FC = 18,750 (12,500 * 0.30)= 15,000

5-4 High-Low Method Sales Volume

10,300

Shipping Expense

3,090

 27,500 5,850 9,300 2,889 15,000 4,200 Highest 5,580 27,500 Lowest 2,889 9,300 Difference 2,961 18,200 2,961 Rate of Variability = 18,200 = 0.163 VC/MH Highest TC = FC + VC FC = 5,850 – (27,500 * 0.163) = 1,367.5 Lowest FC = 2,889 – (9,300 * 0.163) = 1,373 Highest 4,200 15,000 Lowest 2,889 9,300 Difference 1,311 5,700 1,311 Rate of Variability = 5,700 = 0.23 VC/MH Highest FC = 4,200 – (15,000 * 0.23) = 750 Lowest FC = 2,889 – (9,300 * 0.23) = 750

5-5 High-Low Method and Break-Even Computation

 Total Cost Units July 31,700 6,000 August 26,800 4,100 September 32,740 5,800 October 39,600 7,300 November 35,200 5,340 December 37,000 5,300 Highest 39,600 7,300 Lowest 26,800 4,100 Difference 12,800 3,200

Rate of Variability = 12,800 = 4 VC/MH

Highest FC = 39,600 (7,300 * 4) = 10,400 Lowest

FC = 26,800 (4,100 * 4) = 10,400

SP = 9(Given)

3,200

VC = 4

BEP/u = 10,400

5

= 2,080

FC (2,080 x 9) Less: VC (2,080 x 4)

= 18,720

= 8,320

 CM = 10,400 Less: FC = 10,400 BEP = 0

- Deth