CVP – Cost Volume Profit Analysis

A systematic examination of relationships among costs, cost driver, and profit.

Elements of CVP

Sales – Selling Price(SP)

Units or Volume

Total Fixed Costs(FC)

Variable Costs per Unit

Sales Mix

Applications of CVP

  1. Type of Product to Produce and Sell
  2. Pricing Policy
  3. Marketing Strategy to use
  4. Type of Productive Facilities to Acquire

Formulas

Contribution Margin Income Statement

Sales                                              xx

Less: Variable Cost                    xx

CM- Contribution Margin      xx

Less : Fixed Cost                         xx

Income before Tax                     xx

Break Even Point – the sales volume level in pesos or in units where total revenues equal to total costs, that is , there is neither profit nor loss.

BEP pesos  = FC / CM rate

BEP units   = FC / CM u

Multiple Product

BEP pesos = FC / Weighted Average CMrate

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About Jonathan Ruiz CPA

Newbie Mentor and one of the influential author in the Philippines setting. His also the founder of PAM Academy and Developer of PAM PSE TRACKER application.
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