VOLUME COST PROFIT ANALYSIS

Effect of Changes in Variable Costs Assuming an increase of VC by Re 1 a unit for SV Ltd the new contribution margin will be: Rs 3 (Rs 10 – Rs 7) and the revised P/V ratio 0.30 that is. (Rs 3 + Rs 10). Revised BEP = (Rs 26,(00)/0.30 = Rs 86,667 Desired sales...
VOLUME COST PROFIT ANALYSIS

Effect of Changes In Fixed Costs A firm may be confronted with the situation of increasing fixed costs. An increase in the total budgeted fixed costs of a firm may be necessitated either by external factors such as an increase in property taxes, insurance rates,...
VOLUME COST PROFIT ANALYSIS

Additional Sales Volume Required to Offset a Reduction In Selling Price The sales manager on the basis of a market research/survey may report to the management that due to increased compunction in the market and the liberal import policy of the government, the present...
VOLUME COST PROFIT ANALYSIS

Break-Even Analysis Applications Sales Volume Required to Produce Desired Operating Profit One application of a BE analysis is to determine the required sales volume to generate a budgeted amount of profit. The required sales are given by Eq. 8.15. (Fixed expenses +...
VOLUME COST PROFIT ANALYSIS

Equation Technique This is the most general form of analysis, which can be applied to any cost volume profit situation. It is based on an income equation: Sales revenue Total costs = Net profit Breaking up total costs into fixed and variable, Sales revenue Fixed costs...
VOLUME COST PROFIT ANALYSIS

Margin of Safety The excess of the actual sales revenue (ASR) over the break-even sales revenue (BESR) is known as the margin of safety. Symbolically, margin of safety = (ASR – BESR) When the margin of safety (amount) is divided by the actual salt (amount), till...