2 CVP RELATIONSHIPS & PROFIT PLANNING; SINGLE PRODUCT

A 1 VARIABLE COST ₱2.00 .=SALES/UNITS (200,000/100,000)

2 TOTAL CONTRIBUTION MARGIN ₱ 600,000.00 .=FC + PROFIT (200,000 + 400,000)
3 INCOME (if sales increased by 5,000) 230,000.00 (105,000*6(600K/100K) - 400,000 (FC))

B 1 FIXED COST ₱ 50,000.00

2 VARIABLE COST/ UNIT 6 (100%-40%=60%*10)
3 SALES IN UNITS 25,000.00
4 SALES IN DOLLARS/PESO ₱ 250,000.00 (50,000/20%)

C 1 SALES IN UNITS 10,000

Computation:
Sales 400,000
Total CM - 150,000 .=INCOME + FC (60,000 + 90,000)
Variable Cost 250,000
Variable Cost/unit 25
Sales in Units 10,000
2 CONTRIBUTION MARGIN/UNIT 15 .=TCM/SALES IN UNITS (150,000/10,000)
3 INCOME/PROFIT ₱ 60,000.00 .=SALES*RETURNS ON SALE (400,000*15%)

A SELLING PRICE ₱ 10.00 .=SALES/UNITS PER MONTH (500,000/50,000)

B CONTRIBUTION MARGIN PER UNIT ₱ 2.50 .=CONTRIBUTION MARGIN/ UNITS (125,000/50,000)
C BREAK-EVEN POINT-UNIT 24,000 .=FIXED COST/CM PER UNIT (60,000/2.50)
D INCREASED SALES BY 3,000 ₱ 7,500.00 .=INCREASED UNITS*CM PER UNIT (3,000*2.50)
E DESIRED PROFIT= 60,000 48,000 .=(DESIRED PROFIT + FC)/ CM/UNIT (60,000 + 60,000)/ 2.50)
(60,000/(25%(=125,000/500,000)-
F LEVEL OF SALES IN PESO (10% BEFORE-TAX RETURN ON SALES ₱ 400,000.00 .= FC/ (%CM - DESIRED ROS) 10%ROS)
G UNITS TO SELL (45,000 DESIRED PROFIT) 54,000
Computation:
After-tax Profit 45,000.00
Pre-Tax (Desired Profit/60%=1-Tax Rate (40%)) 75,000.00
Fixed Cost 60,000.00
Required Contribution Margin 135,000.00
Contribution Margin/ unit 2.50
54,000.00
H UNITS TO SELL (9% DESIRED AFTER-TAX RETURN) 60,000
Computation:
Desired After-Tax return on Sales 9%
Pre-Tax Return (9%/60%) 15%
Sales (FC/ (25%CM- 15%Pre-Tax) 600,000
Units to Sell (Sales/Selling Price) 60,000
I PRICE CHARGE (45K DESIRED PROFIT; EXPECTED SALES 50K/UNITS 10.20
Computation:
Desired After-Tax Profit 45,000
Pre-Tax (Desired Profit/60%=1-Tax Rate (40%)) 75,000
Fixed Cost 60,000
Required Contribution Margin 135,000
Expected Unit Volume 50,000
Required Contribution Margin (RCM/EUV) 2.7
Variable Cost per Unit 7.5
Selling Price Charge 10.2
J PRICE CHARGE (16% DESRIED BEFORE TAX; EXPECTED SALES 50K/UNITS
Computation:

K TOTAL SALES, PESO; EARN PRE-TAX INCOME 65K + 5% COM ON SALE 625,000
Computation:
CM, (SP- 8 (VC/UNIT + 5% COM ON SALE (500K*5%/UNITS TO SELL) 2
Contribution Margin % (CM/SP) 20%
Required Contribution Margin (FC + Pre-Tax Profit) 125,000
Required Sales (RCM/CM%) 625,000

MODULE 3
CVP ANALYSIS

6 DEGREE OF OPERATING LEVERAGE, MARGIN OF SAFETY AND POINT OF INDIFFERENCES

A MARGIN OF SAFETY-UNITS ₱ 24,111

Computation:
Sales (SP*Units to Sell) 900,000
Variable Cost (VC/U*U to Sell) 540,000
Contribution Margin 360,000
Fixed Cost 316,600
Net Income ₱ 43,400

Break-even Point (FC/CM/U=(CM/Sales)) ₱ 791,500

Margin of Safety, Peso (Sales-BEP) ₱ 108,500
Margin of Safety, Units (MoS,P/SP) ₱ 24,111

B DEGREE OF OPERATING LEVERAGE 8.29 .=CM/PROFIT

C PERCENTAGE INCREASE IN PROFIT (INCREASE SALES IN UNITS BY 30%) 249% .=DEGREE OF OL*30%
Proof: (151,400-43,400)/43,400
 Sales (SP*Units to Sell*1.30 (100%+30%) 1,170,000
Variable Costs (VC/U*Units to Sell*1.30) 702,000
Contribution Margin 468,000
Fixed Costs 316,600
Net Income 151,400
D NEW DEGREE OF OPERATING LEVERAGE; 41,200 increased advert. Sales 7.37 .=Contribution Margin/Net Income)
Computation:
Break-even Point (FC + Increased Adverting Sale)/CM/U 894,500
Sales (SP*Units to Sell*1.15 (100%+15%) 1,035,000
Variable Costs (VC/U*Units to Sell*1.15) 621,000
Contribution Margin 414,000
Fixed Costs (FC+ increased advert. Sale) 357,800
Net Income 56,200

7 Portugal INC.

1 BREAK-EVEN POINT/ UNITS Alternative 1 Alternative 2

Fixed Cost 60,000.00 104,000.00
Selling Price 60.00 60.00
Variable Cost 34.00 28.00
CM 26.00 32.00
Break-even Point (units)= (FC/CM) 2,307.69 3,250.00

2 INDIFFERENCE POINT 7,333

TOTAL COST; V=volume

.=ALT#1,TC= ALT#2, TC
.=FC+VC = FC+VC
.=60K+34V = 104K+28V
.=44,000/6
7,333

8 CVP RELATIONSHIPS&PROFIT PLANNING; MULTIPLE PRODUCTS

1 MODEL PROFITABLE PER UNIT SOLD Gold, 15 (CM)- HIGHEST Regular Silver Gold
Selling Price 10 20 30
Fixed Cost 6 8 15
Contribution Margin 4 12 15
2 MODEL PROFITABLE PER PESO SELLS Silver, 60% (CM%)- HIGHEST Regular Silver Gold
Selling Price 10 20 30
Fixed Cost 6 8 15
Contribution Margin 4 12 15
Contribution Margin% (CM/SP) 40% 60% 50%
3 40% R, 20% S, 40% G
A WEIGHTED-AVERAGE UNIT CM ₱ 10 Regular Silver Gold
Contribution Margin per unit 4 12 15
Sales Mix % 40% 20% 40%
Weighted-Average CM 1.60 2.40 6.00
B BREAK-EVEN POINT IN TOTAL UNITS 20,000.00
Formula: FC/W-ACM (200,000/10)
C TOTAL UNITS TO SELL FOR 30,000 PROFIT/MONTH ₱ 23,000
Formula: (FC + Desired Profit)/W-ACM
4 A SALES MIX IN PESOS, 30% R, 30% S, 40% G ₱ 400,000 Regular Silver Gold
Formula: (FC/Weighted CM) Contribution Margin% (CM/SP) 40% 60% 50%
Sales Mix % 30% 30% 40%
Weighted CM (CM%*SM%) 12% 18% 20%
Total 50%
B SALES TO EARN 30,000/MONTH ₱ 460,000
Formula: (FC+ Desired Profit)/Weighted CM

9 A BREAK EVEN (FC/WCM) 703.125 2,109.38 3,516

A B
Ratio 3 5
Selling Price 1,200 240
Variable Cost 480 160
Contribution Margin 720 80
Weighted Contribution Margin (CM*Ratio) 2,160 400
Total Weighted Contribution Margin 2,560
A B
B 800,000 (INCOME BEFORE TAXES) 1,016 3,048 5,080
Formula: FC+800,000/WCM
C 800,000 PROFIT AFTER TAX & ASSUMING 30% TAX RATE ₱ 1,149.55 3450 5750
Formula: FC+ Before Tax (= Desired Income/remaining tax (70%))/WCM (1,800,000+1,142,857 (800K/70%)/2560)