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+--- Thread: Cost Volume Profit Analysis (/thread-cost-volume-profit-analysis)
Cost Volume Profit Analysis - ez2xs - 02-17-2006
Salamz!!!
How are guyz? i hope you are all fine there. Dear i want to know about cost volume profit.. can anyone explain in easy words.??
Tariq!!
- massood akhter - 02-17-2006
Contribution=Selling price of a unit-Variable cost
massood ar.
- ez2xs - 02-17-2006
Dear Sam,
Thank you for your prompt reply. dear kindly check this example and tell me whether im doing right or wrong?
we have these figures
->Sale price of one unit=1000
->Fixed Cost for one unit=500
->variable Cost for one unit=200
->Contribution as per Massod=1000-200=8000
and we desire that one unit give us Rs=300 profit
CVP=(total fixed costs + desired level of profit)/contribution per unit of production.=???
CVP=1.00
how can we analyse???
Thanks & Regards,
Tariq!!!
- Muhammad Adnan Arshad - 02-20-2006
Cost-Volume-Profit (CVP) Analysis ---- Break Even Analysis
Cost-Volume (CV) Analysis ---- Cost Behaviour Patterns & Cost Estimation Methods
Profit-Volume (PV) Analysis ---- BE & Contribution-Margin Analysis
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«.......... A D N A N ...............»
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- yanjinz - 02-23-2006
I happened to read your question, and I would like to answer it just for reference.
as far as I am concerned, the problem of your question lies in the figure of fixed cost for one unit, which is 500. Given all these conditions, we can calculate the profit per unit as
contribution per unit- fixed cost per unit = 8000-500=7500, so how could it be that profit for one unit is 300? if you want get the figure of 300 for profit per unit, the fixed cost per unit should be 7500(8000-300), instead of 500 per unit.
total fixed cost remains unchanged with the changing of production/sales volume within a certain relevant range, and fixed cost per unit changes as the volume changes. Therefore, total fixed costs ,instead of fixed cost per unit,should be given if your want to work out the sales volume for a desired profit. formulation is as follows
CVP= total fixed costs/( contribution per unit - desired profit per unit)
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by ez2xs</i>
<br />Dear Sam,
Thank you for your prompt reply. dear kindly check this example and tell me whether im doing right or wrong?
we have these figures
->Sale price of one unit=1000
->Fixed Cost for one unit=500
->variable Cost for one unit=200
->Contribution as per Massod=1000-200=8000
and we desire that one unit give us Rs=300 profit
CVP=(total fixed costs + desired level of profit)/contribution per unit of production.=???
CVP=1.00
how can we analyse???
Thanks & Regards,
Tariq!!!
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
shelly
- irfan kazim - 06-25-2009
Some times question is given in aggregate values. like sale, variable cost and fixed cost is given in aggregate value. In this situation, we have to find contribution/sale ratio. divide contribution by total sale which is given. To find BEP in valuea or sale or rupees, divide total fixed cost by contribution/sale ratio discussed above. To check this either or answer is correct or not, find variable/sale ratio likewise contribution/sale ratio. Suppose BEP in rupees is 120000 and varible/sale ratio is 60%. deduct 60% from 120000 and minus fixed cost from contribution, the anwer is zero. your
For example, sale is 300000, varible cost is 150000 and fixed cost is 80000. find bep in rupees.
working" sale-variable cost = contribution
300000-150000 =150000
C/s ratio= 150000/300000=50%
BEP = fixed cost/ c/s ratio
80000/50% =160000
checking"
BEP= 160000
Variable cost. -80000
v/sale ratio
150000/300000
50%
----------
80000
fixed cost -80000
------------
0