2706 Words11 Pages

1.1. Introduction to the concept

The Cost-Volume-Profit(C-V-P) analysis is the analysis of the cost evolution models, which point out the relation between cost, production volume and profit. The C-V-P analysis is a useful forecasting as well as managerial control tool. This analysis technique expresses the relation between income, sales structure, costs, production volume and profits and includes break-even point analysis and profit forecasting procedure. These relations may be used by managers to make short term forecasts, to assess company performance and to analyze decision making alternatives.

Cost volume profit analysis of three variables i.e. cost volume and profit. This analysis measures variation of cost volumes and their impact*…show more content…*

Required Sales

(a) In term Of Values

= Fixed Cost + Required Profit

P/V Ratio

(b) In Term of Unit = Fixed Cost + Required Profit

Contribution per Unit

1.1.4. Profit volume ratio

The profit / volume ratio, better known as contribution / sales ratio (C/S ratio), expresses the relation of contribution to sales.

P/V ratio = Contribution * 100 Sales

(Or)

P/V ratio = Fixed cost + Profit *100 Sales

1.1.5. Margin of Safety

Margin of safety may be defined as the difference between actual sales and sales at breakeven point.

(a) M/S = Actual Sales – B.E.P

(b) M/S = Profit P/V Ratio

1.1.6. Contribution

Contribution is the difference between sales and the marginal cost of sales. It is also known as contribution margin or gross margin.

Contribution = Sales – Variable cost

Contribution = Fixed cost + Net Profit

Contribution = Fixed cost – Net Loss

Contribution = Sales * P/V Ratio

1.1.7. Contribution per Unit

Contribution per Unit = Sales per Unit – Variable Cost per Unit.

The Cost-Volume-Profit(C-V-P) analysis is the analysis of the cost evolution models, which point out the relation between cost, production volume and profit. The C-V-P analysis is a useful forecasting as well as managerial control tool. This analysis technique expresses the relation between income, sales structure, costs, production volume and profits and includes break-even point analysis and profit forecasting procedure. These relations may be used by managers to make short term forecasts, to assess company performance and to analyze decision making alternatives.

Cost volume profit analysis of three variables i.e. cost volume and profit. This analysis measures variation of cost volumes and their impact

Required Sales

(a) In term Of Values

= Fixed Cost + Required Profit

P/V Ratio

(b) In Term of Unit = Fixed Cost + Required Profit

Contribution per Unit

1.1.4. Profit volume ratio

The profit / volume ratio, better known as contribution / sales ratio (C/S ratio), expresses the relation of contribution to sales.

P/V ratio = Contribution * 100 Sales

(Or)

P/V ratio = Fixed cost + Profit *100 Sales

1.1.5. Margin of Safety

Margin of safety may be defined as the difference between actual sales and sales at breakeven point.

(a) M/S = Actual Sales – B.E.P

(b) M/S = Profit P/V Ratio

1.1.6. Contribution

Contribution is the difference between sales and the marginal cost of sales. It is also known as contribution margin or gross margin.

Contribution = Sales – Variable cost

Contribution = Fixed cost + Net Profit

Contribution = Fixed cost – Net Loss

Contribution = Sales * P/V Ratio

1.1.7. Contribution per Unit

Contribution per Unit = Sales per Unit – Variable Cost per Unit.

Related

## Essay Cost Volume Profit Analysis

1042 Words | 5 PagesCost volume profit (CVP) analysis and costing for the 21st century has evolved into a very complex and difficult paradigm. Even the most gifted accountants find that grasping the entire concept of accounting for a corporation can be very mind-boggling and difficult. Yet, understanding such a fundamental principle can allow corporations to grow in ways that other, less educated, corporations can never dream to achieve and simultaneously understand the ‘bottom-line’. In this paper we will discuss value

## Cost Volume Profit Analysis, Cost, Volume, And Profit

1360 Words | 6 Pagesin costs and revenues as the volume of activity increase can be complex. However, for the purpose of managerial decision making it is possible to simplify these models in a way that makes them easy to use and therefore more readily useful to the average manager. In this case, cost volume profit analysis is simple, with its assumption of output as the only revenue and cost driver, and linear revenue and cost relationships. it provides minimum values in more complex decision-making cases. Cost volume

## cost volume profit analysis

2952 Words | 12 PagesQuestion 2 Cost Volume Profit Analysis 1.0 Introduction According to Jon Scheumann “a successful organizations need a culture that is attuned to cost management and pay attention to cost structure” From that statement manager must pay attention and carefully thinking when do decision making to the cost. For example when manager want to target the profit. They must take every cost that related in production such as variable cost and fix costs. Cost Volume profit analysis is used in decisions

## The Cost-Volume-Profit Analysis

923 Words | 4 PagesThe cost-volume-profit analysis (CVP) is used to help companies determine breakeven points and pricing for their products. It is a "method of cost accounting 在ased on determining the breakeven point of cost and volume of goods" and is "useful for managers making short-term economic decisions" (Investopedia, 2013). The mechanism of CVP begins with the revenue, so the price point and the volume of units sold (CliffNotes, 2013). A good way to understand the CVP analysis is using a simple income

## Cost Volume Profit ( Cvp ) Analysis

989 Words | 4 PagesWeek Four Test Cost-Volume-Profit (CVP) analysis is an important tool for managerial decision-making. CVP analysis “is the examination of the relationships among selling prices, sales and production volume, costs, expenses, and profits” (Warren, Reeve, & Duchac, 2014, p. 970). When performing a CVP analysis fixed costs, variable costs, contribution margins, and break-even points are required. Fixed costs do not change when the activity base (activities that cause a variation in cost) changes; while

## Advantages Of Cost Volume Profit Analysis

859 Words | 4 PagesCost volume profit analysis is a logical extension of marginal costing it is based on the principals of classifying the operating expenses into fixed & variable. Now a day it has become a powerful instrument in the hands of powerful instrument in the hands of policy makers to maximize profits. Earning of the maximum profit is the ultimate goal of almost all business undertakings. The most important factor influencing the earning of profit is the level of production

## Cost Volume Profit Analysis (Cvp Analysis)

811 Words | 4 PagesCost Volume Profit Analysis (CVP Analysis) 3.1 Introduction * CVP analysis is a systematic approach of examining the relationship between the changes in volume, cost, revenue and profit. The main objective of this analysis is to establish what will happen to the financial results if a specified level of activity fluctuates. * This analysis is useful especially to plan the future production and sales activity that will enable the firm to maximize profit and at the same time it

## Research Paper On Cost Volume Profit Analysis

1594 Words | 7 Pages1. Context Setting Cost-volume-profit analysis (CVP) is used by management accountants to identify the relationship between profit and the product price, sales volume, variable costs per unit and the total fixed manufacturing costs (Noreen, Brewer, & Garrison, 2011). Breakeven analysis is used in CVP in order to determine the level of sales that must be achieved in order for the company to break even. CVP analysis is primarily for management’s internal use as the metric and calculations are often

## A Brief Note On Cost Volume Profit Analysis

1683 Words | 7 PagesCVP Analysis What is a CVP analysis? Cost-volume-profit (CVP) analysis is the study of the effects of changes in cost and volume on a company’s profits.”(Kimmel, Weyandt & Kieso, 2003, p.263) Cost Volume Profit analysis (CVP) is one of the most hallowed, and yet one of the simplest, analytical tools in management accounting. In a general sense, it provides a sweeping financial overview of the planning process (Horngren et al., 1994). Cost Volume Profit analysis is vital tool for making financial

## Cost-Volume-Profit Assessment and Business Analysis

835 Words | 3 Pagesneed to be tested. The first scenario has the $170 selling price and fixed costs of $20 million. Using these inputs, the first step is to calculate the estimated profit under each scenario. Demand Price VC FC Profit Probability 150000 170 4500000 20000000 1000000 0.25 250000 180000 170 5400000 20000000 5200000 0.5 2600000 200000 170 6000000 20000000 8000000 0.25 2000000 4850000 Est. Profit The second scenario has fixed costs of $25 million, but a higher selling price of $200. These changes need to

### Essay Cost Volume Profit Analysis

1042 Words | 5 Pages### Cost Volume Profit Analysis, Cost, Volume, And Profit

1360 Words | 6 Pages### cost volume profit analysis

2952 Words | 12 Pages### The Cost-Volume-Profit Analysis

923 Words | 4 Pages### Cost Volume Profit ( Cvp ) Analysis

989 Words | 4 Pages### Advantages Of Cost Volume Profit Analysis

859 Words | 4 Pages### Cost Volume Profit Analysis (Cvp Analysis)

811 Words | 4 Pages### Research Paper On Cost Volume Profit Analysis

1594 Words | 7 Pages### A Brief Note On Cost Volume Profit Analysis

1683 Words | 7 Pages### Cost-Volume-Profit Assessment and Business Analysis

835 Words | 3 Pages