ACCA PM · Guided practice (Show me how)
Chapter 8: Cost Volume Profit Analysis
Multi-product CVP: weighted C/S ratio and breakeven revenue
A company produces and sells three products: C, V and P. The budget information for the coming year is as follows:
| C | V | P | |
|---|---|---|---|
| Sales (units) | 4,800 | 4,800 | 12,000 |
| Selling price (per unit) | $5.00 | $6.00 | $7.00 |
| Variable cost (per unit) | $3.75 | $5.25 | $4.35 |
| Contribution (per unit) | $1.25 | $0.75 | $2.65 |
The total budgeted fixed overheads for the year are $8,000.
(a) Calculate the C/S ratio for each product individually. (b) Calculate the average C/S ratio, assuming the budget mix remains unchanged. (c) Calculate the breakeven revenue on that assumption. (e) Assuming the products are produced in order of their C/S ratios, construct a table of cumulative revenue and cumulative profit, and calculate the breakeven sales revenue on this basis.
(a) C/S ratio of each product
Calculate the contribution to sales ratio of each product for the coming year.
(b)-(c) Average C/S ratio and breakeven revenue
Calculate the company's budgeted annual revenue, contribution, weighted average contribution to sales ratio and breakeven sales revenue at the budgeted mix.
(e) Selling the highest C/S ratio first
Prepare the company's cumulative annual revenue and profit table for sales in descending contribution to sales ratio order, and calculate breakeven sales revenue.
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