Scribd
Upload
714 views4 pages

Response To Volume Fixed Variable: 1. Volume 'V' Control 'V' Costs

CVP (Cost Volume Profit) analysis, also known as breakeven analysis, is a quantitative model used to set targets for revenue and occupancy to reach desired profit levels. It is useful for determining the breakeven point, where total sales revenue equals total costs, as well as contribution margin, which is the amount each sale contributes to covering fixed costs and generating profit. While CVP analysis provides a basic framework, it has limitations such as assuming fixed costs remain fixed and costs change linearly with volume.

Uploaded by

Cealpahu
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
714 views4 pages

Response To Volume Fixed Variable: 1. Volume 'V' Control 'V' Costs

CVP (Cost Volume Profit) analysis, also known as breakeven analysis, is a quantitative model used to set targets for revenue and occupancy to reach desired profit levels. It is useful for determining the breakeven point, where total sales revenue equals total costs, as well as contribution margin, which is the amount each sale contributes to covering fixed costs and generating profit. While CVP analysis provides a basic framework, it has limitations such as assuming fixed costs remain fixed and costs change linearly with volume.

Uploaded by

Cealpahu
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 4

CVP

___________________________________________________________________________

1. Volume 'v' Control 'v' Costs

RESPONSE TO VOLUME

FIXED VARIABLE
I Salaries II Utilities
Marketing (F) Food Costs
Professional Fees Bev. Costs
Repair & Mainten.(F) Wages & Benefits
Commissions
Supplies/Laundry

III Rent IV Management Fee


Insurances Franchise Fee
Depreciation Income Tax
Interest

________________________________________________________________________ 1
BM 2003
CVP = Cost Volume Profit Analysis
_________________________________________________________________________

Definition:

A quantitative model that sets targets for revenue


and occupancy to reach desired profit levels.

ALSO known as BREAKEVEN Analysis

Useful Terms:

1. Breakeven = Fixed Costs + Variable Costs

Where total sales revenue = total costs

2. Contribution Margin =
Selling Price - Variable Costs

=contribution to profit and fixed costs

3. CMR = Contribution Margin Ratio (%)

CM divided by selling price = % of sales revenue that


contributes to fixed costs and/or profit

4. Safety Margin =

Access of sales/revenues over the BE to gain a profit.

________________________________________________________________________ 2
BM 2003
CVP = Breakeven Analysis

Definition

Breakeven:

Net Income =

Selling Price - Variable - Fixed


Costs Costs

In other words,

Costs = Income

________________________________________________________________________ 3
BM 2003
CVP Analysis - Limitations

• Fixed Costs remain fixed

• Variable costs fluctuate in a linear fashion

• Revenue is directly proportional to volume

• Mixed costs are properly divided into fixed


and variable elements

• All cost are assigned to individual


departments

• CVP Model considers only quantitative


factors

________________________________________________________________________ 4
BM 2003

You might also like