CHAPTER 5 : COST VOLUME PROFIT
ANALYSIS_ANSWER
(a) Equation techniques
⛄ SP = RM875,000 / 35,000 u
= RM25.00 per unit
⛄ VC = RM700,000 / 35,000 u
= RM20.00 per unit
⛄ FC = RM100,000 + RM100,000
= RM200,000
BEP (unit) = Sales – VC – FC
0 = RM25u – RM20u – RM200,000
= RM5u
RM200,000 = 40,000 unit
BEP unit
(b) CMR = (CM / Sales) x 100%
BEP (RM) = [RM175,000 / RM875,000] x 100%
= 20%
= FC / CMR
= RM200,000 / 0.2
= RM1,000,000
(c) Sales Manager’s proposal
Sales (units) = [FC + Target Profit] / CM
40,000 u = [RM300,000 + profit] / [RM30 – RM20]
40,000 u = [RM300,000 + profit] / RM10
Profit = RM400,000 – RM300,000
= RM100,000
Current loss = (RM25,000)
RM100,000
New profit =
RM125,000
Increase in profit
Decision : Accept the proposal from Sales Manager.
(d) Salesperson’s proposal
Sales (units) = [FC + Target Profit] / CM
40,500 u = [RM310,000 + profit] / [RM30 – RM23]
40,500 u = [RM310,000 + profit] / RM7
= RM283,500 – RM310,000
Loss = (RM26,500)
Current loss = (RM25,000)
New loss = (RM26,500)
Increase in loss RM1,500
Decision : Reject the proposal from Salesperson.
(e) Margin of Safety excess of budgeted or actual sales over the BEP sales.