# Cost Volume Profit Analysis part 1

1. says

Hello john,

I am confused Here:
Currently: SP was 20. Vc was 8. Fc was 840000pa.
So breakeven was 840000/12 which is 70000units.

But When they carriedout newplant FC Has 1200000pa But Vc decreased to 5pu.
So Now breakeven was 1200000/20-5 which is 80000units.

Now if the Company Wanted to B/even same quantity as old the Selling Price would be like: 70000*X=1200000 which comes 17.14 for the Contribution PU. So 17.14+Vc 5 which is 22.14 will be the selling price.

If the new plant is built, the company would wants to decrease its price to \$19 to improve its competitive position.

i. At which quantity would profits of the old and the new plants be equal (assuming the price of a toaster is \$20 for the old plant but \$19 for the new)? How much would the profit be at this quantity?

ii. If sale are projected to reach 150,000 units per year in the near future, would you recommend construction of the new plant? Why or why not? (Assume that both plants have the capacity to produce this quantity.)

Can you please Tell me how to do this one. Please soon. Thankx

2. says

Hi John

How would I work this out,

‘The budgeted profit statement of a company, with all figures expressed as a percentage of revenue is as follows:

Revenue: 100
Variable cost 40
Fixed cost 20
Profit 40

If the sales volume turns out to be only 80% of that budgeted, the profit, expressed as a percentage of the revised revenue will be in %.’

3. says

Hi John

Could you please work this out: Revenue for Product A = \$10m C/S ratio: 15%,
Product B: \$20m C/S ratio: 10%

Total fixed cost: \$5.5m and company wants to earn a profit of \$1m

What is the revenue that needs to be generated by Product C, in million, to achieve the required profit?

4. Temperance says

@ Johnmoffat

Hi Sir, will I loose marks in exam if I use pen to draw graphs? The graph paper I am currently using to practice is very deep and the graph is not showing as clearly.

• Temperance says

Noted!Thank you Sir!

5. says

I am not attending any formal coaching… . I would like to know why many. Sites ask us to refer to the student articles . Why are these articles so important ? Does a certain percentage of the question paper happen to be from the articles ?

• says

The articles in Student Accounting are always useful and worth reading – especially those by the examiner because it lets you know how they are thinking.
Although the articles are all obviously on topics in the syllabuses, each exam does not necessarily include topics covered in the articles.

• says

Oh okie Thankyou Sir …

• says

Sorry, the videos are not downloadable. It is the only way that we can keep this site free of charge.

6. says

Please any one can tell me if it is necessary to complete Professional ethics module to convert from FIA suite to ACCA qualification.
I have passed my FIA papers but still not converted to ACCA qalification from FIA suite.Please guide me what next to do…………………?

• says

Just contact to them or wait they will convert you automatically don`t need to worry as i was the same case last year i they converted me once the time reach..

7. says

breakeven point should be at the point where revenue line cross the fixed cost line and lose range would b under the fixed cost line? this is my understanding sorry!!!, but in lecture breakeven is being point out where total cost cross the total revenue? lost also showing same way?, Am really confuse about it!! i would be great full if you could explain it please. thx.

• says

Breakeven is when the profit is zero. Profit will be zero when the total revenue is equal to the total costs (fixed costs + variable costs).

I think that what you are confusing it with is that for zero profit, the total contribution will be equal to the fixed costs – contribution equals the revenue minus the variable costs.

You should watch the lecture again slowly.

8. says

Total Revenue = Total Contribution / CS Ratio

1320 / 0.67 = \$ 1,970.00

(not \$1,980.00, just to clear any confusion)

9. says

Hello John,

Thanks for great lectures. Just wanted to ask how important is CVP for Dec 2012 exams, as i checked the exam kit and CVP doesn’t seem to appear in last 6 exam sessions though it appears as a part of the syllabus. I’m a bit confused.

Thanks.

• says

Just because it is in the syllabus does not mean that it is examined every time.
It was examined in December 2012.

10. says

In break even chart, shouldn’t it be the line that crosses fixed cost line? In the lecture it highlights the line that crosses the variable cost line.

• says

@yama, In a break even chart, break-even is where the total revenue line crosses the total cost line.