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CVP analysis

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › CVP analysis

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by John Moffat.
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  • December 2, 2021 at 9:48 pm #642349
    lokeshdh00
    Participant
    • Topics: 111
    • Replies: 106
    • ☆☆☆

    C/S ration Shows how much each $ sold actually contributes to fixed costs.

    so, If c/s ration of product A = 0.4 and B= 0.25 and combined is 0.34375.

    how would you interpret them,

    because Clearly , the C/S ratio if multiplied by 100 , it shows percent of contribution as sales not percent of fixed cost as sales. to find the fixed cost per $ , It should be subtracted from 1. like Fixed cost for each unit sold of A = 0.6 per usd.

    am i right ?

    also, please do tell how do you find out the mosts profitable product from c/s ratio.

    December 2, 2021 at 10:37 pm #642350
    lokeshdh00
    Participant
    • Topics: 111
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    • ☆☆☆

    I understood, I read an ACCA article on same and The wording confused me. When I returned to notes , it’s was there : company can reach breakeven first if It sells highest C/S ratio (most profitable) product first.

    December 3, 2021 at 8:36 am #642370
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    That is correct 🙂

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