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Copyright © ACCAspace.comACCAspace 中国ACCA特许公认会计师教育平台
ACCA F5
Performance Management (PM)
业绩管理
ACCA Lecturer: Kimberley Gong
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1
2
What is cost volume profit(CVP)/breakeven analysis
Single product breakeven analysis
Content of chapter 7
3 Breakeven chart analysis
4 Lecture example
5 Multi-product break-even charting analysis
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CVP/breakeven analysis
What is CVP/breakeven analysis?
Most businesses need to at least break-even their
setting prices with output levels.
The break-even point is the sales volume which will
give the company a profit of $nil.
If sales exceed the break-even point the company will
make a profit.
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CVP/breakeven analysis
Assumptions of CVP/breakeven analysis
(a) Can only apply to one product , or to more products
Only if they are sold in fixed sales mix
(b) Constant unit variable costs and total fixed costs
(c) Constant selling price per unit
(d) Production volume=sales volume
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CVP/breakeven analysis
Single product breakeven analysis
Method 1 : Activity level at which there is neither
profit or loss
Break even point =
Method 2:The amount of contribution earned per
dollar of sales
Contribution/sales ratio =
Break even revenue = or
Break even point x selling price/unit
Fixed costs
Unit contribution
Contribution/unit
Selling price/unit
Fixed costs
C/S ratio
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CVP/breakeven analysis
Single product break even analysis
Method3:The difference between the budgeted level
of activity and the break-even level of activity
Margin of safety(in units) = Budgeted sales-Break even
sales
Margin of safety(%) =
Sales volume to earn a
required profit
Budgeted sales- Break even sales
Budgeted sales
=Required profit+ Fixed costs
Contribution per unit
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CVP/breakeven analysis
Breakeven chart analysis
Chart 1 : Break-even chart
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Lecture example 1
Company Z has fixed xosts of $6000 and variable costs per
unit of $4
Required:
A) If the selling price is $8 at all levels,what is the break-even
point?
B) What is the break even revenue?
C) What is the c/s ratio?
D)If budgeted sales are 9000 units,what is the margin of
safety in units?
What is the margin of safety as a %?What doed this mean?
E) What are the sales volume (in units) required to make a
profit of $5000?
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Lecture example 1
A)BEP=
B) Break even revenue =
= 1500X8=12000
C)
=4/8=0.5
D)
=9000-1500=7500
Fixed cost
Unit contribution=
6000
8-4
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=7500/9000=83.3%
E)
=
=2750
5000+6000
8-4
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CVP/breakeven analysis
Chart 2:Contribution break-even chart
This chart is used to highlight the importance of
contribution and focus on the variable costs.
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CVP/breakeven analysis
Chart 3:The profit-volume chart
The advantage of profit-volume chart is that it is
capable of depicting clearly the effect o profit and
break-even point of any changes in variables.
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CVP/breakeven analysis
Multi-product break-even analysis
Assume sales mix remains constant.
Weighted average C/S ratio =
Sales volume to earn a required =
Profit
Margin of safety = Budgeted sales-Break even sales
Margin of safety(%)=
total contribution
total revenue
Required profit +Fixed costs
weighted average C/S ratio
Budgeted sales-Break even sales
Budgeted sales
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CVP/breakeven analysis
BEP=
EG.
=
FC
Weighted average contribution per unit
A B C
units 1000 2000 3000
Selling price $4 $5 $6
VC $2 $2 $2
1000XCA+2000XCB+3000XCC
1000+2000+3000
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CVP/breakeven analysis
Multi-product break-even charting analysis
1. Break-even chart (Similar to single product)
2. Product volume graph (Assume product a , b , c)
(1) Calculate C/S ratio of each product being sold
and rank the products in order of profitability.
(2) Asix—x shows cumulative sales revenue and
asix-y shows cumulative profit earned . Find point V
representing total sales and point K representing
fixed cost when profit is zero.
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CVP/breakeven analysis
(3) Draw line km . The slope of km is c/s ratio of
product a . It shows the profit earned by product a.
(4) Draw line mn which represents the profit earned
by product b which has lower c/s ratio than
product a . Draw line np which represents the least
profitable product c.
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Lecture example 2
United Trading sells three products as follows.
Assume that the sales mix is ‘ fixed ’ in these
proportions . Fixed costs are $20000.
Required
(a) What is the breakeven sales volume?
(b) What is the breakeven sales revenue?
(c) Draw the Profit-volume chart
Product Footballs Baseballs Rugby balls
$ $ $
Selling price 7 6 9
VC 3 4.5 5
Budgeted sales(units)
2000 4000 3000
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Lecture example 2
Working : C/S ratio
(a)
proportion=2:4:3
F B R
4/7=57.1% 25% 44.4%
1 3 2
A B C
contribution 4 1.5 4
=
2X4+4X1.5X3X4
2+4+3
= $2.89
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Lecture example 2
BEP =20000/2.89 = 6921units
(b) 6921units
F=(2)=1538 , B = (4)=3576 , R=(3) =2307
X7 X6 X9
=10766 =18456 =20763
Total BER= 49985
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Lecture example 2
2000 5000 9000
FC20000
12000
6000
6921
$
Total sales volumes
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CVP/breakeven analysis
Appraisals of CVP analysis
Advantages Disadvantages
More easily understood by non-financial managers
Assume all costs can be dividedas fixed or variable
Profit/loss at any level within the range can be determined
Fixed costs are constant
Indication of risks by highlighting breakeven point and margin of safety
Variable cost or selling priceper unit is constant
Inventory levels are constant (Sales = Production)
Ignore uncertainty in estimating fixed and variable costs
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