CVP single product

Question 1

1) SALES VOLUME

Answer 1

1. Breakeven Sales volume

BES volume = (Total fixed cost)/
(Contribution per unit)

2. Sales volume to achieve desired profit
   Sales volume = (Total fixed cost + Desired PBT)
   /(Contribution per unit)

Note:
• Total fixed cost includes every fixed cost
• Contribution per unit = Sales price per unit – every variable cost per unit

Question 2

2) SALES REVENUE

Answer 2

1. Breakeven Sales Revenue
   = (Total fixed cost)/
   (Contribution Margin ratio)
2. Sales revenue to achieve desired profit
   = (Total fixed cost + Desired PBT)/(Contribution Margin ratio)

Question 3

Contribute Margin

Answer 3

(Sale price per unit – Variable cost per unit)
/Sales price per unit
(OR)
• CM ratio = (Total Sale revenue – Total Variable costs)/ Total sales revenue

Also Called
C/M ratio (Contribution margin ratio)
C/S ratio (Contribution to sales revenue
P/V ratio (Profit volume ratio)

Question 4

3) MARGIN OF SAFETY

Answer 4

1. Margin of safety units
   MOS (units) = BS units – BES units
   OR
   MOS (Rs.) = BS Revenue – BES Revenue
2. Margin of safety ratio or margin of safety (%)
   MOS ratio = (BS units – BES units)
   /BS units
   (OR)
   MOS ratio = (BS Revenue – BES Revenue)/BS Revenue

Question 5

4) SALE PRICE PER UNIT TO EARN DESIRED PROFIT

Answer 5

Sale price per unit
= (Total fixed cost + Total variable cost + Desired PBT) ÷ Sales volume