Cvp Analysis

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

The breakeven point is used my companies to prevent loss. The Cost Volume Profit (CVP) is the tool in which to capture the breakeven point. Sometimes it is referred to as the breakeven analysis. The CVP assists the company in identifying future operation need, production costs, and expansion possibilities based on estimating costs, prices, and volumes. This profit response can help Competition Bikes determine the amount of needed sales, what products to manufacture, pricing policies, marketing strategies, and how much profit is actually needed. In this analysis we will assume

Post increasing ad costs, breakeven volume will increase from 7505 to 7805. This means that the current sales tickets would have to increase by 300 (approximately 13%) to reach breakeven. It is reasonable to expect an increase in breakeven levels due to advertising, but it is an uncertain measure to fully assess whether it will translate to increase in sales. Certain exogenous factors such as quality of the advertising, market demand for luxury goods, competition, etc., could hinder sales growth. Therefore, this measure alone is just one possible solution to a combination of measures to improve sales.

According to, Skills for Business Decisions, “Cost-volume-profit (CVP) analysis examines changes in profits in response to changes in sales volumes, costs, and prices.” (Kimmel P.D. 2009) A company’s profit is the CVP profit equation of Profit = Revenue – Expenses. A Cost-volume-profit (CVP) analysis consists of five basic components that include:

= Unit Selling Price – Unit Variable Cost = $9.00 – ($1.25 + $0.35 + $1.00) = $6.40

3. Compare the financial results from Question 1 and 2 and highlight your observation regarding contribution. Based on your calculations, what is the relationship between volume and cost?

12) Suppose a firm has $1500 in variable costs and $500 in fixed costs when it produces 500

The variable cost per unit is $25 and the revenue per unit is projected to be $45.  Find the break-even point.Answer

Suppose its average cost is $15 and its average variable cost is $8. Its contribution margin (i.e., contribution to fixed cost) is

The Central Valley Company is a merchandising firm that sells a single product. The company’s revenues and expenses for the last three months are given below:

Before performing the CVP analysis for the Hampshire manufacturing firm, we identify two basic cost classifications of interest comprising variable costs and fixed costs. As we analyze the case in study, we need to initially acknowledge that both variable costs per

Some of the assumptions of CVP as outlined by accountingformanagenment are: selling price is constant regardless of volume change, costs are linear, with multi-products the sales mix is constant, and manufacturing companies inventories do not change (N.D.). Because of the assumptions

This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that