CVP

Question 1

What is the Break-even units and Sales value formula, if you are selling one product?

Answer 1

BEU = Fixed Costs / (SP per unit - VC per unit)
BES = Fixed Costs / (SP per unit - VC per unit) * SP per unit

Question 2

What is the Break-even units of each product and Sales value formula, if you are selling two product?

Answer 2

• BEU = Fixed Costs / ((SP per unit - VC per unit) * sales proportion of product) + ((SP per unit - VC per unit) * sales proportion of product)
• BEU of product 1 = BEU * sales proportion of product 1
• BEU of product 2 = BEU * sales proportion of product 2
  BES = (BEU of product 1 * SP per unit of P1) + (BEU of product 2 * SP per unit of P2)

Question 3

What is the formula to calculate your Margin of safety in Sales value and Units

Answer 3

MOS (units) = budgeted/actual sales units - Breakeven units
MOS (sales value) = budgeted/actual sales value - Breakeven sales value

Question 4

What is the formula to calculate your Margin of safety in Sales value and Units, when you have more than one product in Sales

Answer 4

MOS (units) = budgeted/actual sales units in prodcut X - Breakeven units of product X
MOS (sales value) = budgeted/actual sales value of product X - Breakeven sales value of product X

Question 5

How do you calculate how many units you need to sell to acquire your target Profit figure?

Answer 5

simply add your desired Profit to the Fixed costs in the Break even formulas

Question 6

How do we analyze the importance of one products profitability when a company sells more than one product? (MAF 20 Q)

Answer 6

• Calculate the percentage contribution of that product to the total breakeven contribution
• calculate the maximum contribution that could be obtained from that product if everything was sold and see if it can cover fixed costs?
• Compare it to thr other products and their percentages and ability to cover fixed costs
• discuss what you have learned
• discuss obvious things to help them improve profitability