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    MA CVP Solution

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    1. Case 4 has the highest revenues of $11 million and contribution of $2.2 million. 2. It has a profit of $220,000, higher than any of the other cases. 3. While its variable costs are high at $8.8 million, its fixed costs of $1.98 million are manageable given its contribution level.

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    MA CVP Solution

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    All in ONE
    24 views11 pages
    1. Case 4 has the highest revenues of $11 million and contribution of $2.2 million. 2. It has a profit of $220,000, higher than any of the other cases. 3. While its variable costs are high at $8.8 million, its fixed costs of $1.98 million are manageable given its contribution level.

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    MA CVP solution

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    1. Case 4 has the highest revenues of $11 million and contribution of $2.2 million. 2. It has a profit of $220,000, higher than any of the other cases. 3. While its variable costs are high at $8.8 million, its fixed costs of $1.98 million are manageable given its contribution level.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    24 views11 pages

    MA CVP Solution

    Uploaded by

    All in ONE
    1. Case 4 has the highest revenues of $11 million and contribution of $2.2 million. 2. It has a profit of $220,000, higher than any of the other cases. 3. While its variable costs are high at $8.8 million, its fixed costs of $1.98 million are manageable given its contribution level.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 11

    COGS = fixed mfg cost + variable mfg cost Mkt & dist cost = fixed + variable

    variable mfg cost = COGS - fixed mfg cost 11,50,000 = fixed + (200000*4)
    variable mfg cost = 1600000 - 500000 1100000 fixed = 11,50,000 - 800000
    variable mfg cost per unit = 1100000/200000 5.5 350000

    Contribution Income Statement (200000 units)


    Sales 2,600,000
    less variable cost
    variable mfg cost 1100000
    variable mkt & dist cost =200000*4 800000 1900000
    Contribution 700,000
    less fixed cost
    fixed mfg cost 500000
    fixed mkt & dist cost 350000 850000
    Profit -150,000
    Mkt & dist cost = fixed + variable SP = 2600000/200000
    11,50,000 = fixed + (200000*4) 13
    fixed = 11,50,000 - 800000

    Financial Accounting Income Statement (230000 units) CPU 13 - 5.5 -4 3.5


    Sales (230000*13) 2,990,000
    less variable cost BEP units 850000/3.5 242857.1
    variable mfg cost 1265000 BEP 3157142.86
    variable mkt & dist cost =230000*4 920000 2185000
    Contribution 805,000
    less fixed cost
    fixed mfg cost 500000
    fixed mkt & dist cost 350000 850000
    Profit -45,000
    BEP Fixed cost / PV Ratio
    500000/40%
    1250000

    Total sales BEP + margin of safety


    100 BEP + 37.5
    BEP 100 - 37.5
    62.5
    62.5 1250000
    100 ?

    Total sales (1250000*100)/62.5


    2000000

    variable cost ratio = 100 - PV ratio


    60%
    Variable cost 2000000*0.6
    1200000

    Profit = contribution - fixed cost (2000000*0.4) - 500000


    300000

    MOS total sales - BEP total sales = 2000000*107.5%


    2150000 - 1250000 2150000
    900000
    PV Ratio = change in profit / change in sales Contribution - fixed cost = profit
    (50000-40000)/(340000-300000) Fixed cost = Contribution - profit
    0.25 25% (300000*25%) - 40000
    35000
    BEP Fixed cost / PV Ratio
    35000/25%
    140000

    Desired sales = fixed cost + profit / PV ratio


    (35000+80000)/25%
    460000

    Profit = contribution - fixed cost


    (500000*25%)-35000
    90000

    Margin of safety = actual - BEP Desired sales = fixed cost + profit / PV ratio
    540000-140000 (35000+100000)/25%
    400000 540000

    Variable cost = sales * variable cost ratio Variable cost ratio = 100 - PVR
    100-25
    2021 300000*75% 225000 75%
    2022 340000*75% 255000
    fit / PV ratio
    PV Ratio = change in profit / change in sales
    (32400-10800)/(513000-405000)
    0.2 20%

    Contribution - fixed cost = profit


    Fixed cost = Contribution - profit
    (405000*20%) - 10800
    70200

    Profit/loss = contribution - fixed cost


    (324000*20%)-70200
    -5400

    Desired sales = (fixed cost + profit) / PV ratio


    (70200+54000)/20%
    621000
    A B
    Direct material 10 9
    Direct wages 3 2
    Variable expenses 3 2 100% of direct wages
    Total variable cost per unit 16 13
    SP 20 15
    Contribution per unit 4 2

    Sales mix 1 2 3
    Units of A 100 150 200
    Units of B 200 150 100
    total contribution 800 900 1000
    less fixed cost 800 800 800
    profit 0 100 200
    PRODUCT A PRODUCT B
    Sales 100 120
    Material cost 10 15
    Direct wages cost 15 10
    Direct expenses 5 6
    Variable o/h 15 20
    total variable cost 45 51
    contribution per unit 55 69

    PV ratio C/S*100 55 57.5

    contribution per kg of RM 55/2 69/3


    27.5 23

    contribution per machine hour 55/3 69/2


    18.333333333 34.5

    Raw material available 10000


    product A (3500*2) 7000
    Available for B 3000
    units of B 3000/3 1000

    A B Total
    units 3500 1000
    CPU 55 69
    Contribution 192500 69000
    less fixed cost (5;10 at maximum capacity) 17500 35000
    Profit 175000 34000 209000
    1) Total sales potential in units is limited; B

    2) Total sales potential in value is limited; A

    3) Raw material is in short supply; A

    4) Production capacity (in terms of machine hours) is the limiting factor. B


    Existing Case 1 Case 2

    Revenues 10,000,000 Revenues 10,000,000 Revenues 10,000,000


    VC 8,000,000 VC 8,200,000 VC 8,000,000
    CPU 2,000,000 CPU 1,800,000 CPU 2,000,000
    Fixed cost 1,800,000 Fixed cost 1,800,000 Fixed cost 1,890,000
    Proft 200,000 Proft 0 Proft 110,000
    Case 3 Case 4

    Revenues 9,200,000 Revenues 11,000,000


    VC 7,360,000 VC 8,800,000
    CPU 1,840,000 CPU 2,200,000
    Fixed cost 1,800,000 Fixed cost 1,980,000
    Proft 40,000 Proft 220,000

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