ACCA PM · Guided practice (Show me how)
Chapter 8: Cost Volume Profit Analysis
CVP for one product: breakeven, margin of safety and the C/S ratio
Product X has variable costs of $2 per unit, and a selling price of $6 per unit. The fixed costs are $1,000 per year.
(a) If budgeted sales and production are 300 units, what is the budgeted profit (or loss) for the year? (b) What is the breakeven point (in units)? (c) What is the breakeven revenue? (d) How many units need to be sold to achieve a target profit of $300 per year?
(e) Calculate the margin of safety. (f) Calculate the C/S ratio, and the sales revenue needed to generate a target profit of $320.
(a)-(d) Contribution, profit, breakeven, target profit
Calculate product X's contribution per unit, annual budgeted profit, breakeven units and revenue, and sales units required for the specified target profit.
(e) Margin of safety
Calculate product X's annual margin of safety as a percentage of budgeted sales.
(f) C/S ratio and target revenue
Calculate product X's contribution to sales ratio and annual sales revenue required for the specified target profit.
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