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CVP Analysis Samples

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Volume (units) 60000

Total Sales Revenue 45000000

Total Fixed Costs 8000000

Total Variable Costs 15000000

pi 22000000

(P-V) 500

22000000

16000

32000000

(e) Target volume in units if the company is to make an operating profit of 25000000 for the year

66000

(f) Target volume in units if the company is to make 16250000 for the year, net of tax. (Tax Rate = 35%

pi 25000000

66000

Exercise 2

Contribution Margin 15000

Fixed Cost 12000000

Sales Profit Margin 10%

Net Profit (pi) 10800000

1520

(b) What is the price per unit of the computers at the level of sales in (a)?

71,052.63

pi+F=(P-V)X

pi+F=PX-VX

VX=PX-pi-F

V=(PX-pi-F)/X

56,052.63

(d) What is the number of units to be sold if the sales profit margin is 20% instead of 10%?

21600000

2240

Exercise 3

Using the data from Exercise 1

(a) The impact on operating profit if sales price decreased by 10%

Sales Price 750

New Sales Price (-10%) 675

Total Fixed Costs 8000000

Total Variable Costs 15000000

Volume (units) 60000

Operating Profit 17,500,000.00

(b) The impact on operating profit if variable cost per unit decreases by 10%

Variable Cost 250

New Variable Cost (-10%) 225

Total Fixed Costs 8000000

Total Sales Revenue 45000000

Volume (units) 60000

Operating Profit 23,500,000.00

(c) The impact on operating profit if fixed costs were 10% lower while variable costs per unit were 20%

Variable Cost 250

New Variable Cost (+20%) 300

Fixed Cost 8000000

New Fixed Cost 7200000

Total Sales Revenue 45000000

Volume (units) 60000

Operating Profit 19,800,000.00

(d) Suppose that the company can only produce 50000 units (instead of 60000) but still wants to achi

Increase the selling price or lower the variable costs or fixed costs. =selling price has the

Exercise 5

A B

Selling Price per unit 12 15

Variable costs per unit 2.5 5

Contribution Margin 9.5 10

Total Fixed Cost 1500000

Volume (units) 300000 100000

(a) What is the expected level of operating profits for the expected sales volumes?

Operating Profit 2,350,000.00

(b) What is the break-even point if only A are sold? If only product B are sold?

If product A only 157894.7368421

If product B only 150000

(c) Assuming the same product mix at the break-even point, compute the break-even point for each p

pi = (P-V)A + (P-V)B - F

A=3B

9.5A+10B=1500000 B 38961.04

A 116883.1

1500000 = 9.5A + 10A

Exercise 6

000 for the year

d of 10%?

ut still wants to achieve the same level of operating profit (22000000). How can this be achieved?

=selling price has the greatest effect in the operating profit (change in sales)

even point for each product

e achieved?

Company A

Sales 1500 300 450,000.00

Less: Var Cost 1500 120 180,000.00 CMR CM

Contribution Margin 270,000.00 0.6 180

Less: Fix Cost 250,000.00

Operating Inc 20,000.00

Sales 1500 300 450,000.00

Less: Var Cost 1500 220 330,000.00 CMR CM

Contribution Margin 120,000.00 0.266667 80

Less: Fix Cost 100,000.00

Operating Inc 20,000.00

Company A - Higher Fixed Costs - higher operating leverage -> good for higher sales level

Cost structure depends on expected sales levels

CM/Unit 10

Fixed Cost 1000

Target Operating Income = just add target income in the Fixed Costs in the denominator

CM 2000 3000 4000

Operating Profit 1000 2000 3000

DOL 2 1.5 1.333333333

Same Company but different DOL's; hence need to use the first formula that uses % change

Volume

BE (units) BE (pesos) Sales

1388.8888888889 416,666.67 Fixed Costs

Variable Costs

Contribution M

Contribution M

Contribution M

BE (units) BE (pesos) BE Point (units

1250 375,000.00 BE point (pesos

Company A

Sales 2000 300 600,000.00

Less: Var Cost 2000 120 240,000.00

Contribution Margin 360,000.00

he denominator Less: Fix Cost 250,000.00

Operating Inc 110,000.00

Sales 2000 300 600,000.00

hat uses % change Less: Var Cost 2000 220 440,000.00

Contribution Margin 160,000.00

Less: Fix Cost 100,000.00

Operating Inc 60,000.00

DOL (B) 6.00 -> means 20% increase/decrease, yo

-> in reality, 2 is the average level

-> when should you choose high? If y

200 400

5000 10000

2000 2000

3000 6000

2000 4000

10 10

40% 40%

200 200

5000 5000

CMR CM

0.6 180

CMR CM

0.2666666667 80

ncrease/decrease, you expect operating income to increase by 135%

s the average level

you choose high? If you expect your sales level to exceed your break-even point

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