Cost Volume Profit Analysis (Management Accounting)

Cost Volume Profit Analysis (CVP Analysis)

• It is a planning study.
• Under Marginal Costing 

Types of Analysis

1. Breakeven Analysis  (No Profit & No loss)
2. profit volume Analysis

Formulas:

Breakeven Point (Volume):                 TC= TR

        Breakeven Point (Volune)=       (Fixed Cost)/(contribution per unit)

         FC = All fixed cost
Contribution = Sales – All variable cost

Breakeven Point (value):

breakeven point ( value)=           sales units×selling price per unit

Breakeven Point (Value)=           (fixed cost )/(C/S  ratio)

Sales volume to earn target profit:


Breakeven Point (Volume)=                  (fixed cost+Target profit)/(Contribution per unit)




Sales value to earn target profit :

        breakeven point ( value)=              sales units×selling price per unit

Breakeven Point (Value)=              (fixed cost+Target profit)/(C/S  ratio)

Margin of safety: MOS, MS
   
        MOS= Budgeted sales – Breakeven point

MOS Ratio =   MOS/Budgeted sales ×100

Relationships:

variable and  contribution :

Sales – variable cost = contribution
Sales – contribution = variable cost

If variable cost 40% of sales then 60% contribution of sales.

Breakeven and Mos

Sales – Breakeven = MOs
Sales - MOs = Breakeven point