COST-VOLUME PROFIT & BREAKEVEN POINT Exercise 1

Princess Company sells several products. The following

COST VOLUME PROFIT (CVP) ANALYSIS data is provided for analysis:
• a systematic examination of the relationships among Selling price per unit: P30
revenues, costs, activity levels/volume, and profit.
Variable costs per unit:
Sales/ Revenue Direct material P5
Less: Variable Cost Direct labor P2
Contribution Margin Factory overhead P.5
Less: Fixed Cost Selling cost P2.5
Profit
Monthly fixed cost P20,000
Total Total Total
Variable Contribution Compute for the break-even point in units and in pesos.
Sales Cost Margin

Variable Profit
Total Cost 10%
60%
Sales
100% Variable 30%
Cost Fixed Cost
Princess Company sells several products. The following
data is provided for analysis:
BREAKEVEN POINT Selling price per unit: P30
• that point of activity level (sales volume/pesos) Variable costs per unit:
where total revenues equal total costs Direct material P5
Direct labor P3
BEP Total Total Fixed
Variable Cost Factory overhead P.5
Sales Cost Selling cost P2.5

BEP Units 1,000

Variable Fixed Cost
BEP Cost 40% Compute for the total fixed cost
60%
Sales
80% Variable
Fixed Cost
Cost

Princess Company sells several products. The

following data is provided for analysis:

FC
Selling price per unit: P30

Total Fixed Cost P20,000

BEP Units 1,000

Compute for the variable cost per unit.

BEP CM
Units/Pesos Unit/Ratio
Exercise 2

Prince Corp. produces only two products, A and B. These

account for 60% and 40% of the total sales pesos for
Prince's respectively. Variable costs as a percentage of
sales pesos are 60% for A and 85% for B. The total fixed
costs are P150,000. There are no other costs.

Requirement:

1.Compute for weighted contribution margin ratio.

2. Compute for break-even point in sales pesos.
3. Compute for sales pesos necessary to generate net
income of P9,000 if total fixed costs will increase by
30%.

ASSUMPTIONS & LIMITATIONS

• All costs are classifiable as either Fixed or Variable

• Fixed costs remain constant within relevant range
• Behavior of total revenues and total costs will be
linear over the relevant range
• No significant change in the inventory level during
the period under review

MARGIN OF SAFETY

indicates the amount by which actual or planned sales

may be reduced without incurring a loss
BASIC COST CONCEPT PART 1-3 ▪ Manufacturing overhead (Indirect labor and
Direct labor)
COST = WORTH ▪ Product Cost – Hindi agad naeexpense unless
COST siya ay mabenta na
▪ Period Cost- Nabebenta na ones na inquire sa
• Value foregone period
• Sacrifice of Resources --- Achieve Desired Benefit
COST BEHAVIOR
COST OBJECT
▪ Ex. Motor
• mga bagay na maaassignan mo ng cost ▪ Variable Cost- Kapag tumataas ang quantity,
• Ex. Products, Tao or Departments, tumataas din ang Cost
Manufacturing or Services ▪ Fixed Cost – Same Parin
• anything na malalagyan mo ng halaga ▪ Mixed Cost- tataas pag lumampas na sa fixed
cost Sales Agent
COST DRIVER Basic Salary + Commission
• nag dradrive ng cost This is called Semi-variable Cost or Mixed Cost
• nag papababa or nagpapataas ng cost ▪ Semi-Fixed Cost or Step Cost
• Ex. Cost of electricity in a factory, nagpapataas parang hagdan, If 1 is to 6 then 2 is to 12 and so
is yung pag gamit nila ng mga machines on
(Machine Hours)
• Ex. Orders, Madaming orders kaya madami din
return orders

COST POOL

• Pag ggroup ng mga cost

• Ex. Type (Materials or process)
• Ex. Sources ( sa iba’t ibang department depende
sa kanilang functions)
• Ex. Responsibility (Responsibility ng managers
kung saan sila naka assign) ▪ Formula
Total VC = VC per Unit x Units
Kailangan natin ito have proper allocation of cost FC per unit = Total FC / Units
Total Cost = Total VC + Total FC
CLASSIFICATION OF COST

• Nature or Management Function

o Manufacturing Cost
▪ Ex. Chair (Direct Materials-Direct Labor-
Indirect Materials-Indirect Labor)
▪ Kung saan mo makikita yung cost, yun ang
▪ Variable
tawag
Direct relationship w/ Level of Production
▪ Freight-in = Manufacturing Cost
▪ Fixed
▪ Freight-out Selling Cost
Inverse Relationship w/ Level of Production
▪ Period and Product Cost
can be fixed of variable