COST VOLUME PROFIT ANALYSIS

COST-VOLUMEPROFIT
ANALYSIS
Julie E. Colandog

A systematic examination of the relationship among cost, cost driver or level of activity (volume), and

Sales
Less: Variable
Costs
Contribution
Margin
Less: Fixed Costs
Net Profit

xxxx xxxx xxxx xxxx xxxx

CONTRIBUTION MARGIN
INCOME STATEMENT

e s Sa l Total
Cost

Break-even point Fixed
Cost

Break-even point is a condition where total revenue equals total cost and profit is equal to zero BREAK-EVEN POINT

Break-even point (pesos) =
Total Fixed Cost / Contribution
Margin Rate
Break-even point (units) =
Total Fixed Cost / Contribution
Margin per unit

Break-even formula:
Break-even point in Pesos:
Break-even point in units: BEPp = FC/CMr
BEPu = FC/CMu
Where:
where:
FC = Fixed cost
FC = Fixed cost
CMr = Contribution margin rate CMu = Contribution margin per unit Other Formula: where: CM = S – VC
CM = Contribution margin
CM/u = SP – VC/u S = sales
CMR = CM ÷ S
VC = variable cost
VCR = VC ÷ S
VCR = Variable cost rate
CMR + VCR = 100% CM/u = Contribution margin unit
VC/u = Variable cost per unit

Consider the following data:
Sales (10,000 units @10)
100,000
Variable Cost (10,000 @6)
60,000
Contribution margin
40,000
Fixed costs
30,000
Profit
10,000
BEPu = 30,000/4 = 7,500 units
6)/10
BEPp = 30,000/40% = 75,000
(40,000/100,000

CMu = (10CMR =

Compute the BEP in units
Compute the BEP in pesos

Break-even: Multiple Product where: BEPp = FC/WaCMR FC = Fixed cost
BEPu = FC/WaCMU WaCMR = weighted average contribution margin rate
WaCMU = weighted average cotribution margin per unit Example:
Product A Product B Product C
Selling price
100
120
50
Variable cost per unit
60
90
40
Contribution margin per unit
40
30
10
Sales in units
1,000
2,000
5,000
Total fixed cost 101,680

Product A

Product B

Product C

Total

Sales

100,000.00 240,000.00 250,000.00 590,000.00

Variable cost
Contribution
margin

60,000.00 180,000.00 200,000.00 440,000.00
40,000.00 60,000.00 50,000.00 150,000.00

WaCMR = Total CM/Total Sales WaCMR