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CVP Analysis for Business Owners

1. The document outlines formulas for conducting cost-volume-profit (CVP) analysis, including: calculating unit contribution, total contribution, break-even point in units and volume, profit-volume ratio, sales required for a target profit, and margin of safety. 2. It also provides formulas for multi-product CVP analysis, including: contribution margin, variable cost ratio, break-even point in volume, calculating pretax income from net income, and the revised CVP equation to determine break-even point. 3. Additional formulas calculate sales mix as the percentage of departmental sales to total sales.

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Abhishek Khurana
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214 views2 pages

CVP Analysis for Business Owners

1. The document outlines formulas for conducting cost-volume-profit (CVP) analysis, including: calculating unit contribution, total contribution, break-even point in units and volume, profit-volume ratio, sales required for a target profit, and margin of safety. 2. It also provides formulas for multi-product CVP analysis, including: contribution margin, variable cost ratio, break-even point in volume, calculating pretax income from net income, and the revised CVP equation to determine break-even point. 3. Additional formulas calculate sales mix as the percentage of departmental sales to total sales.

Uploaded by

Abhishek Khurana
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

CVP Analysis Formulas

1. Unit selling price – Unit variable cost = Unit contribution

2. Unit contribution * Unit sold = Total contribution

3. Total contribution = Total fixed cost + Profit

4. In Units

Total fixed cost

BEP (units) = ---------------------------------------------------

Selling price – Variable cost per unit

or
Total fixed cost

= -----------------------------------------

Contribution

5. ii) In volume:

Total fixed cost

BEP (rupees) = ---------------------------------------

Variable cost per unit

1 – ----------------------------------

Selling price

6. P/V Ratio: Variable cost per unit

1- -------------------------------------------

Selling Price per unit

7. Sales to be made to get a required profit

Required profit + Fixed cost

Units to be sold = ---------------------------------------------

Contribution per unit


8. Margin of Safety = Total sales – Break even sales

Formula for Multi product Firm:


9. Contribution Margin or P/V ratio

Contribution

= ---------------------------

Sales

10. Variable cost ratio

Variable Cost

= --------------------------

Sales

11. BEP (Volume)

Fixed Cost

BEP= ----------------------

P/V

12. To calculate Pretax income.

Ib = Pretax income

In = Net income

t = Tax rate

In

Ib = ---------------

1- t

13. Revised CVP equation to arrive at the break even point.

Sales = Fixed cost + Pretax income

P/V ratio

14. Sales Mix = Departmental Sales

Total Sales

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