CVP Analysis

MAY 2011
Lisa company is the exclusive distributor for an automobile product.

The product sells for tk. 40 per unit and has CM ratio 30%. The
company's fixed expenses are Tk. 180000.00 per year.
Required:
i) What is the variable expenses per unit?
ii) Using the equation method :
a) What is the break-even point in units and sales taka?
b) What sales level in units and in sales taka is required to earn an
annual profit of taka 60,000.00?
c) Assume that by using a more efficient shipper, the company is
able to reduce its variable expenses by Tk. 4 per unit . What is the
company's new break-even point in units and sales Taka?
iii) Repeat (ii) using the unit contribution method
Answer i)
We know
CM ratio = Contribution /sales
CM ratio = (selling price - VC per unit)/ selling Price
0.30
= (40-VC)/40
12
= 40-VC
VC
= 40 - 12
28 Per unit
Answer (ii) Equation Method

1) BEP in Units and Taka
We have
P = 40, V = 28 and FC = 180000.00
40x = 28x + 180000.00
40x - 28x = 180000.00
12x
= 180000.00
x
= 15000.00 Units
So, Break even in unit = 15000 units
Break-even point in sales taka = 40X1500 = 6,00,000.00 taka
2) Targeted sales in unit and taka
If targeted Profit Tk. 60000.00
We have
40x = 28x + 180000+ 60000.00
40x-28x =240000.00
12x
= 240000.00
x
= 20000.00 units
So, Break-even in unit =20000.00 units
Break-even point in sales = 40X 20000.00
= 8,00,000.00 Taka
BEP in Units and Taka (If VC changes)

If VC reduces by Tk. 4
We have
P = 40 V = 28 - 4 = 24 and FC = 180000.00
40x
= 24x + 180000.00
40x-24x = 180000.00
16x
= 180000.00
x
= 11250.00 units
So, Break even in Units
= 11250 units
Break-even point in sales taka = 40 X 11250
= 450000.00 Tk
Answer (iii) Unit contribution Method
1) BEP in Units and taka
BEP Units
= Fixed costs/Contribution Margin per Unit
= Fixed costs/(Selling Price-VC per Unit)
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
= Fixed Costs/CM Ratio
=180000/0.30
= 600,000.00 Taka
2) Targeted Sales in Units and Taka

Targeted sales in units
=( Fixed cost + Targeted Profit)/contribution Margin per unit
=(fixed cost + Targeted profit)/Selling Price - VC per Unit)
= (180000.00 + 60000.00)/(40-28)
=240000/12
=20000.00 Units
Tageted sales in Taka
= (fixed Cost + Targeted profit)/CM Ratio
=(180000+ 60000)/0.30
= 8,00,000.00 Taka
3) BEP in Units and Taka (if VC charge)
= BEP in units
= Fixed cost/Contribution Margin per unit
= Fixed costs/(Selling price- VC per unit)
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(Selling Price - VC per Unit)/Selling Price
=(40-24)/40
= 0.40
=40%
BEP in Taka
= 180000.00/0.40 = 4,50,000.00 Taka
NOVEMBER 2011
1. DISCUSS THE USEFULNESS AND ASSUMPTIONS OF BREAK-EVEN
ANALYSIS ?
Answer :
The break even point is helpful in making decisions in business. It is a
simple tool defining the lowest quantity of sales which will include both
variable and fixed costs. Moreover such analysis facilitates the
managers with a quantity which can be used to evaluate the future
demand. If, in case the break even point lies above the estimated
demand, reflecting a loss on the product, the manager can use this
information for taking various decisions. It is also helpful in
recognizing the relevance of fixed and variable cost. The fixed cost is
less with a more flexible personnel and equipment thereby resulting in
a lower break-even point.
Assumption of Break-even analysis

1. Cost can be reasonably subdivided in to fixed and variable
components
Fixed costs and variable cost can be easily identified in most

cases. Fixed costs are depreciation, salaries, rent etc. variable
Cost are direct labor and materials cost.
Semi variable expenses can be problematic, but can nonetheless

be separated into fixed and variable components for analysis
purpose.
2. All cost volume Profit relationships are linear.
5
Assumption holds so long as analysis is confined

to reasonable range of operations.
If levels of operations are doubled, relationship may be different.
3. Sales prices will not change with changes in volume.
Economic theory states that one would normally expect price
increase to be accompanied by decrease in sales volume and vice
versa.
Assumption holds so long as analysis is confined to reasonable
range of prices.
2. The Paradise Shoe Company sells five different styles of ladies choppers with identical
costs and selling prices. The company is trying to find out the profitability of opening another
store which has the following expenses and revenues:
Per pair
Selling Price
Variable cost
Salesman commission
Total Variable cost
taka
30.00
19.50
1.50
21.00
Annual Fixed Expenses are

Rent
Salaries
Advertising
Other fixed expenses
Total
60000.00
2,00,000.00
80,000.00
20,000.00
3,60,000.00
Required :
i) Calculate the annual Break even point in units and in value. Also determine the profit or loss if
35,000 pairs of choppals are sold.
ii) The sales commission are proposed to be discounted, but instead a fixed amount of taka
90,000.00 is to be incurred in fixed salaries. A reduction in selling price of 5% is also proposed.
What will be the Break-even point in units?
iii) It is proposed to pay the store manager 50 paisa (tk 0.50) per pair a further commission.
The selling price is also proposed to be increased by 5%. What would be the Break-even point
in units?
iv) Refer to the original data. If the store manager were to be paid 30
paisa (tk 0.30) commission on each pair of choppal sold in excess of
Break-even point, what would be the store's net profit, if 50,000 pairs
were sold ?
SOLUTION
Requirement (i)
Contribution per unit
= Selling Price - Variable cost

= 30.00 - 21.00
= 9.00 tk
CM Ratio
= Contribution X 100
Sales
= (9 X 100)/30
= 30%
Break-even point (BEP) in unit
= Fixed expense/ Contribution
Margin
= 3,60,000.00/9
= 40,000.00 pairs
Break-even point (in value)
= Fixed expense/ CM ratio
= 3,60,000/0.30
= 12,00,000.00 taka.
Profit or loss for 35000 pairs sold
sales X CM ratio - Fixed cost
= 35000 X 30 X 30% - 360000.00
= 315000 - 360000
= -45000.00 tk (loss)
Requirement (ii)
Reduction of selling Price 5% = 30 30x5% = 28.50 tk
Sales commission = 0
Total Fixed expense = 360000 + 90000 =
450000.00
Contribution Margin
New Break-even point

Margin
= Selling Price - Variable Cost

= 28.50 - 19.50
= 9.00 Tk
= New fixed expense / contribution
= 450000/9
= 50,000.00 Units(pairs)
Requirement (iii)
Selling price 5% increase
= 30 + 30x5 = 31.50 Tk
New variable cost = 21.00 + 0.50 = 21.50
Tk
Contribution Margin
New Break-even Point
= Selling Price - Variable cost

= 31.50 - 21.50 = 10.00
= Fixed expense / Contribution Margin
= 360000/10
= 36000.00 units (pairs)
Requirement (iv)
Commission to be given to store manager
for 10000 (50,000-40000) units . So total excess commission to be given
is equal to 10000 X 0.30 = 3000.00 Taka.
Profit
= Selling Price - (variable cost + 3000) Fixed expenses
= 50000 X 30 - (50000 X 21 + 3000) 360000.00
= 15,00,000 - 10,53,000-360000
= 87000.00 tk
Or
Profit
= 50000 X 9 - 3000- 360000
= 87000.00
MAY 2012 CVP ANALYSIS

Mita company is the exclusive distributor for an automobile
product. The product sells for tk. 40 per unit and has CM ratio
30%. The company's fixed expenses are Tk. 180000.00 per year.
Required:
b) What sales level in units and in sales taka is required to earn
an annual profit of taka 60,000.00?
able to reduce its variable expenses by Tk. 4 per unit . What is
the company's new break-even point in units and sales Taka?
Answer i)
We know
0.30
= (40-VC)/40
12
= 40-VC
VC
= 40 - 12
28 Per unit
10
Answer (ii) Equation Method

1) BEP in Units and Taka
We have
P = 40, V = 28 and FC = 180000.00
40x = 28x + 180000.00
40x - 28x = 180000.00
12x
= 180000.00
x
= 15000.00 Units
So, Break even in unit = 15000 units
Break-even point in sales taka = 40X1500 = 6,00,000.00 taka
2) Targeted sales in unit and taka
If targeted Profit Tk. 60000.00
We have
40x = 28x + 180000+ 60000.00
40x-28x =240000.00
12x
= 240000.00
x
= 20000.00 units
So, Break-even in unit =20000.00 units
Break-even point in sales = 40X 20000.00
= 8,00,000.00 Taka
BEP in Units and Taka (If VC changes)
If VC reduces by Tk. 4
We have
P = 40 V = 28 - 4 = 24 and FC = 180000.00
40x
= 24x + 180000.00
11
40x-24x = 180000.00
16x
= 180000.00
x
= 11250.00 units
So, Break even in Units
Break-even point in sales taka = 40 X 11250
= 11250 units
= 450000.00 Tk

BEP Units
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
=180000/0.30
= 600,000.00 Taka
= (180000.00 + 60000.00)/(40-28)
=240000/12
=20000.00 Units
12

=(180000+ 60000)/0.30
= 8,00,000.00 Taka

= BEP in units
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(40-24)/40
= 0.40
=40%
BEP in Taka
= 180000.00/0.40
= 4,50,000.00 Taka
13
JUNE 2013 CVP ANALYSIS

Eva company is the exclusive distributor for an automobile
Required:
Answer i)
We know
0.30
= (40-VC)/40
12
= 40-VC
VC
= 40 - 12
= 28 Per unit
14

BEP Units
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
=180000/0.30
= 600,000.00 Taka
= (180000.00 + 60000.00)/(40-28)
=240000/12
=20000.00 Units
=(180000+ 60000)/0.30
= 8,00,000.00 Taka
= BEP in units
15
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(40-24)/40
= 0.40
=40%
BEP in Taka
= 180000.00/0.40
= 4,50,000.00 Taka
16
DECEMBER 2013 CVP ANALYSIS

Feather Friends Inc. makes high quality wooden birdhouse. In the
most recent year company sold 5000 units of its product @Tk. 50
per unit. At this level of sales they generated contribution margin
of tk. 1,12,500 and net income of Tk. 22,500. Management is
anxious to improve the companys profit performance and has
asked for several items of information
Requirement
i)
Eva company is the exclusive distributor for an automobile
Required:
17
Answer i)
We know
0.30
= (40-VC)/40
12
= 40-VC
VC
= 40 - 12
= 28 Per unit
BEP Units
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
=180000/0.30
= 600,000.00 Taka
= (180000.00 + 60000.00)/(40-28)
=240000/12
18
=20000.00 Units
=(180000+ 60000)/0.30
= 8,00,000.00 Taka
= BEP in units
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(40-24)/40
= 0.40
=40%
BEP in Taka
= 180000.00/0.40
= 4,50,000.00 Taka
19

Feather Friends Inc. makes high quality wooden birdhouse. In the
most recent year company sold 5000 units of its product @Tk. 50
per unit. At this level of sales they generated contribution margin
of tk. 1,12,500 and net income of Tk. 22,500. Management is
anxious to improve the companys profit performance and has
asked for several items of information
Requirement
i)
Compute the companys CM ratio and variable
expense ratio ?
ii)
Compute the companys Break-even point in both
units and sales taka
iii)
Assume that the sales increase by Tk. 40,000 next
year. If cost behavior patterns remain unchanged , by how much
will the companys net income increase?
iv)
Refer to the original data, assume that next year
management wants the company to earn a minimum profit of taka
31,500. How many units will have to be sold to meet this target
profit figure?
v)
Refer to the original data, compute the companys
margin of safty in both taka and percentage form.
vi)
A) Compute the companys degree of operating
leverage at the present level of sales.
b) Assume that through a more intense effort by the sales
staff the companys sales increase by 12% next year. By what
percentage would you expect net income to increase? Use
oprating leverage concept to obtain your answer.
c) Verify your answer to vi) b) by preparing a new income
20
statement showing a 12% increase in sales.

Answer :
Contribution Margin = Selling Price Variable Cost
112500
= 5000X50 Variable Cost
250000 112500
= Variable Cost
Variable cost
= 137500
Net Profit = Sales Fixed Cost Variable cost
22500 = 250000 Fixed cost 137500
= 250000 137500 Fixed Cost
= 112500 Fixed Cost
112500 22500 = Fixed cost
Fixed cost = 90000 Taka
Sales
Variable cost
Contribution Margin
Fixed cost
Net income
In Unit
Sales
Variable cost
Contribution Margin
Fixed cost
Net Income
250000 Tk
137500 Tk
112500 Tk
90000 Tk
22500 Tk
Taka
50
27.50 (137500 / 5000)
22.50
90000 Tk
22500 Tk
21
(i)
CM ratio
= Contribution Margin x
100
Sales
= 22.50 X 100
50
= 45% or 0.45
(ii)
Break-even Point in Units

= Fixed expense/contribution Margin
= 90000/22.50 = 4000 units
Break-even Point in sales

= 90000/0.45 = 2,00,000 taka
(iii) Sales increase by 40000 taka = 40000/50 = 800 Units
increase
New sales = 250000 + 40000 = 290000 taka
Variable cost = 137500 + 800 X 27.50 = 159500.00 Taka
Net Income = Sales Variable cost Fixed cost
= 290000 159500 90000
= 40500 taka
Net income increase = 40500 22500 = 18000 taka
(iv)
Target sales in units
= Fixed expense + target profit

Contribution Margin
22
= (90000 + 31500)/22.50
= 5400 units
(v)
Margin of Safety
Sales in taka Break even sales in taka = 250000 200000 =

50000 taka
Margin of Safety ratio =
Margin of safety X 100

Sales
= 50000 X
100
250000
= 20%
(vi)
(a) Degree of Operating Leverage
= Sales Variable cost
Sales Variable Cost Fixed Cost
= 250000 137500
250000 137500 90000
= 112500
22500
=5
23
b) sales increase by 12 % , so percentage of net income

increase by 5 X 12% = 60%
(c)
Sales 250000 X 12% =
280000.00 Taka
Variable cost X 12% =
154000.00 taka
Contribution Margin=
126000.00 taka
cost
Fixed
90000.00 taka
Net profit
36000.00 taka
Increase = 36000 - 22500 = 13500 X 100
22500
= 60% proved
sales.
b) Assume that through a more intense effort by the sales
staff the companys sales increase by 12% next year. By what
percentage would you expect net income to increase? Use
oprating leverage concept to obtain your answer.
c) Verify your answer to vi) b) by preparing a new income
statement showing a 12% increase in sales.
24
Answer :
Contribution Margin = Selling Price Variable Cost
112500
= 5000X50 Variable Cost
250000 112500
= Variable Cost
Variable cost
= 137500
Net Profit = Sales Fixed Cost Variable cost
22500 = 250000 Fixed cost 137500
= 250000 137500 Fixed Cost
= 112500 Fixed Cost
112500 22500 = Fixed cost
Fixed cost = 90000 Taka
Sales
Variable cost
Contribution Margin
Fixed cost
Net income
In Unit
Sales
Variable cost
Contribution Margin
Fixed cost
Net Income
(i)
250000 Tk
137500 Tk
112500 Tk
90000 Tk
22500 Tk
Taka
50
27.50 (137500 / 5000)
22.50
90000 Tk
22500 Tk
CM ratio
= Contribution Margin x
25
100
Sales
= 22.50 X 100
50
= 45% or 0.45
(ii)
Break-even Point in Units

= Fixed expense/contribution Margin
= 90000/22.50 = 4000 units
Break-even Point in sales

= 90000/0.45 = 2,00,000 taka
(iii) Sales increase by 40000 taka = 40000/50 = 800 Units
increase
New sales = 250000 + 40000 = 290000 taka
Variable cost = 137500 + 800 X 27.50 = 159500.00 Taka
Net Income = Sales Variable cost Fixed cost
= 290000 159500 90000
= 40500 taka
Net income increase = 40500 22500 = 18000 taka
(iv)
Target sales in units
= Fixed expense + target profit

Contribution Margin
= (90000 + 31500)/22.50
= 5400 units
26
(v)
Margin of Safety
Sales in taka Break even sales in taka = 250000 200000 =

50000 taka
Margin of Safety ratio =
Margin of safety X 100

Sales
= 50000 X
100
250000
= 20%
(vi)
(a) Degree of Operating Leverage
= Sales Variable cost
Sales Variable Cost Fixed Cost
= 250000 137500
250000 137500 90000
= 112500
22500
=5
b) sales increase by 12 % , so percentage of net income
increase by 5 X 12% = 60%
(c)
27
Sales 250000 X 12% =

280000.00 Taka
Variable cost X 12% =
154000.00 taka
Contribution Margin=
126000.00 taka
cost
Fixed
90000.00 taka
Net profit
36000.00 taka
Increase = 36000 - 22500 = 13500 X 100
22500
= 60% proved
28
Hawaiian Candy Company is a wholesale distributor of candy. Small

but steady growth
in sales has been achived by the company over the past few years
while candy price have
been increasing . The company is manufacturing its plan for the
coming fiscal year.
Presented below are the data used to project income of
Tk.1,84,000:
Average selling price
Tk.4.00 per box
Average variable costs

Cost of candy
Tk.2.00 per box
Selling Expenses
Tk.0.40 per box
Total
Tk.2.40 per box
Annual fixed costs

Selling
Administrative
Tk.160,000
Tk.280.000
29
Total
Tk.440,000
Expected annual sales volume (3,90,000 boxes) Tk.1,560,000.

The manufacturing of the candy have announced that they will
increase prices of their
products by 15 percent in the coming year. The company expects
that all other cost will
remain the same rates or levels as the current year.
Required :
(i) What is Hawaiian Candy Companys break-even point in boxes of
candy and in Taka
amount for the current year?
(ii) Calculate margin of safety and degree of operating leverage of the
current year.
what will be change in expected profit if expected sales are
increased by 15%.
(iii) What selling price per box must the company charge to cover the
15% increase in the cost of candy and still maintain the current
contribution margin ratio?
30
Here : Contribution per unit = Selling price per unit Variable cost per
unit
(i)
Break-even point (in units)
Margin per unit
=
=Fixed cost/Contribution
440000
4 - 2.40
= 2,75,000 boxes
Break Even Point in (Taka)
= B/E X Selling Price per unit

= (2,75,000 X 4) Taka
= 11,00,000 Taka
(ii)
C/M Ratio
= Contributin X 100
Sales
= 4 2.40 X 100
4
= 40%
Margin of Safety
= Sales Break-even sales
31
= 15,60,000 11,00,000
= 4,60,000 taka
Degree of Operating Leverage
= Sales Variable Cost

Net
Profit
= 15,60,000 936000
184000
= 3.39
Sales increase by 15% , So Profit will be changed to 3.39 X 15% =

50.85%
(iii)
Contribution Margin = Sales Variable cost
2.40 = Sales (Cost of candy + Selling expense)

2.40 = Sales ( 2 + 2X15% + 0.40)
2.40 = Sales ( 2.30 + 0.40)
32
2.40 + 2.70 = Sales

So, Selling Price = 5.10 Taka per Unit
Ishrak company is the exclusive distributor for an automobile product.

The product sells for tk. 40 per unit and has CM ratio 30%. The
company's fixed expenses are Tk. 180000.00 per year.
Required:
b) What sales level in units and in sales taka is required to earn an
annual profit of taka 60,000.00?
able to reduce its variable expenses by Tk. 4 per unit . What is the
company's new break-even point in units and sales Taka?
Answer i)
We know
0.30
= (40-VC)/40
33
12
VC
= 40-VC
= 40 - 12
= 28 Per unit

BEP Units
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
=180000/0.30
= 600,000.00 Taka
= (180000.00 + 60000.00)/(40-28)
=240000/12
=20000.00 Units
=(180000+ 60000)/0.30
34
= 8,00,000.00 Taka
= BEP in units
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(40-24)/40
= 0.40
=40%
BEP in Taka
= 180000.00/0.40
= 4,50,000.00 Taka
35

The Following is the Raiyan corporations contribution format
income statement for last month :
Items
taka
Sales
12,00,000
Variable expenses
8,00,000
Contribution Margin
4,00,000
Fixed expense
3,00,000
Net operating income
1,00,000
The company has no beginning or ending inventories and

produced and sold 20,000 units during the month.
Required :
(i) What is the companys contribution margin ratio ?
(ii) What is the companys Break-even units ?
(iii)
If sales increase by 100 units how much should net
operating income increase ?
(iv)
How much units would the company have to sell to attain the
target profits of Tk. 1,25,000 ?
(v) What is the companys margin of safety in taka ?
(vi)
What is the companys degree of operating leverage ?
Answer :
(i)
Contribution Margin Ratio
= Contribution X 100
Sales
36
= 12,00,000 8,00,000 X
100
12,00,000
= 33.33 %
(ii) Break-even in units
Contribution Margin in units will be as below
Items
taka per units
Sales
60
Variable expenses
40
Contribution Margin
20
Fixed expense
3,00,000
1,00,000
So, Break-even in units

=
Fixed expense
Contribution Margin
= 3,00,000
20
= 15,000 units
(iii) If sales increase by 100 units, New sales will be as below
20,000 + 100 = 20100 units and income statement is as below
sales (20100 X 60)
= 12,06,000
Variable Expanse (20100 X 40)
= 8,04,000
Contribution Margin
= 4,02,000
Fixed Expense
= 3,00,000
Net Operating Income
= 1,02,000
Net Income increase = 1,02,000 - 1,00,000 = 2,000 taka
37
(iv) Target sales in units

= Fixed expense + Target profit
Contribution Margin
= 3,00,000 + 1,25,000
20
= 4,25,000
20
= 21150 units
(v) Margin of Safety in taka
= Sales - Break-even sales
= 12,00,000 - (15,000 X 60)
= 12,00,000 - 9,00,000
= 3,00,000 taka
(vi) Degree of Operating Leverage
=
DOL
Sales - Variable Cost

Sales - variable cost - Fixed expense
= 12,00,000 - 8,00,000
1,00,000
= 4,00,000
1,00,000
=4
38

Minden company introduced a new product last year for which it is
trying to find an optimal selling price. Marketing studies suggest
that the company can increase sales by 5000 units for each tk. 2
reduction in the selling price. The company's present selling price
is tk. 70 per unit and variable expenses are tk 40 per units. Fixed
expenses are 540000 per year. The present annual sales volume
(at the taka 70 selling price) is 15,000 units.
Required
1. What is the present yearly net operating income or loss ?
2. What is the present break-even point in units and in taka sales?
3. Assumes that the marketing studies are correct, what is the
maximum profit that the company can earn yearly. At how many
units and what selling price per units would the company generate
this profit?
4. What would be the break-even point in units and in sales taka
using the selling price you determine in (3) above(e.g the selling
price at the level of the maximum profits) ? Why is the break even
point different from the break-even point you computed in (2)
above ?
Answer
1. Present Operating Income
Items
taka
Sales (15000 X 70)
10,50,000
Variable expenses (15000 X 40)
6,00,000
Contribution Margin
4,50,000
Fixed expense
5,40,000
39
Net operating income/loss

Net loss = 90,000 taka
- 90,000
2. Present Break even point in units

Items
taka/unit
Sales
70
Variable expenses
40
Contribution Margin
30
Fixed expense
5,40,000
Break even point in units

= Fixed Expense
Contribution Margin
= 540000
30
= 18,000 units
Break-even in taka sales
CM ratio = Contribution Margin X 100
Sales
= 30 X 100
70
= 42.857%
Break even in taka sales
= Fixed Expense / CM ratio
= 540000/0.4285714
= 12,60,000 taka
3. sales increase by 5000 units if tk. 2 reduction per unit
40
So, selling price will be 70 -2 = 68 taka and total unit will be

15000 + 5000 = 20,000 units sold. Profit will be as follows :
Items
taka
Sales (20000 X 68)
13,60,000
Variable expenses (20000 X 40)
8,00,000
Contribution Margin
5,60,000
Fixed expense
5,40,000
20,000
Maximum profit earn as per market suggestion is taka 20,000

only. Unit 20,000 and per unit selling price 68 taka only.
4. Break-even point in new selling price
CM ratio
= 5,60,000 X 100
13,60,000
= 41.176471%
Break even in Sales taka = Fixed expense / CM ratio
= 540000/0.41176471
= 13,11,428 taka
Break even in units = 13,11,428/ 68 = 19286 units
41

CVP Analysis

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CVP Analysis

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MAY 2011

Lisa company is the exclusive distributor for an automobile product.

Answer (ii) Equation Method

BEP in Units and Taka (If VC changes)

2) Targeted Sales in Units and Taka

Assumption of Break-even analysis

Fixed costs and variable cost can be easily identified in most

Semi variable expenses can be problematic, but can nonetheless

Assumption holds so long as analysis is confined

Annual Fixed Expenses are

= Selling Price - Variable cost

New Break-even point

= Selling Price - Variable Cost

= Selling Price - Variable cost

MAY 2012 CVP ANALYSIS

Answer (ii) Equation Method

Answer (iii) Unit contribution Method

Tageted sales in Taka

3) BEP in Units and Taka (if VC charge)

JUNE 2013 CVP ANALYSIS

Answer (iii) Unit contribution Method

DECEMBER 2013 CVP ANALYSIS

DECEMBER 2013 CVP ANALYSIS

statement showing a 12% increase in sales.

Break-even Point in Units

Break-even Point in sales

Target sales in units

= Fixed expense + target profit

Sales in taka Break even sales in taka = 250000 200000 =

Margin of safety X 100

b) sales increase by 12 % , so percentage of net income

Break-even Point in Units

Break-even Point in sales

Target sales in units

= Fixed expense + target profit

Sales in taka Break even sales in taka = 250000 200000 =

Margin of safety X 100

Sales 250000 X 12% =

JUNE 2014 CVP ANALYSIS

Hawaiian Candy Company is a wholesale distributor of candy. Small

Tk.4.00 per box

Average variable costs

Tk.2.00 per box

Tk.0.40 per box

Tk.2.40 per box

Annual fixed costs

Expected annual sales volume (3,90,000 boxes) Tk.1,560,000.

Break Even Point in (Taka)

= B/E X Selling Price per unit

= Sales Break-even sales

Degree of Operating Leverage

= Sales Variable Cost

Sales increase by 15% , So Profit will be changed to 3.39 X 15% =

Contribution Margin = Sales Variable cost

2.40 = Sales (Cost of candy + Selling expense)

2.40 + 2.70 = Sales

DECEMBER 2014 CVP ANALYSIS

Ishrak company is the exclusive distributor for an automobile product.

Answer (iii) Unit contribution Method

JUNE 2015 CVP ANALYSIS

Net operating income

The company has no beginning or ending inventories and

Contribution Margin Ratio