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Assumptions For Rev and Cost Planning

The document discusses cost-volume-profit (CVP) analysis and how it can be used to determine the level of sales or production needed to achieve a desired profit level. It provides the equations for calculating sales or units needed using contribution margin per unit or ratio. An example is given where a company wants to earn P100,000 in profit. Based on its contribution margin of P4 per unit and fixed costs of P150,000, the company would need to produce and sell 62,500 units for net sales of P625,000 to achieve the desired profit level.

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Jaime Palizardo
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70 views2 pages

Assumptions For Rev and Cost Planning

The document discusses cost-volume-profit (CVP) analysis and how it can be used to determine the level of sales or production needed to achieve a desired profit level. It provides the equations for calculating sales or units needed using contribution margin per unit or ratio. An example is given where a company wants to earn P100,000 in profit. Based on its contribution margin of P4 per unit and fixed costs of P150,000, the company would need to produce and sell 62,500 units for net sales of P625,000 to achieve the desired profit level.

Uploaded by

Jaime Palizardo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Raymundo

Assumptions for Revenue and Cost Planning

First Slide:
Cost-volume-profit (CVP) Analysis

- It can be used to determine the level of sales needed to achieve a desired level of
profit.
-In revenue planning, it assists managers in determining the revenue required to
achieve a desired profit level.

Second Slide:
Equations

Sales(units)=Total ¿ Cost + Desired Profit ¿


Contribution Margin Per Unit

Sales( Pesos)=Total ¿ Cost + Desired Profit ¿


Contribution Margin Ratio

Or

Sales( Pesos)=Total ¿ Cost + Desired Profit ¿


1−(Variable Cost ÷ Sales)

Third Slide:
Example

If the company wants to earn P100,000, how many units should be produced and
what woould be the financial outcome?

Total Per Unit Assuming


Desired Profit
is P100,000
Net Sales 500,000 10
Variable Costs 300,000 6
Contribution Margin 200,000 4
Fixed Cost 150,000 3
Net Profit 50,000 1 100,000

Fourth Slide:
Computation

150,000+ 100,000
Sales(units)=
4

250,000
¿
4

Sales(units)=62,500 units

150,000+100,000
Sales(Pesos)=
200,000÷ 500,000

250,000
¿
0.4

Sales(Pesos)=P 625,000

Fifth Slide:
Total Per Unit Assuming
Desired Profit
is P100,000
Net Sales 500,000 10 625,000
Variable Costs 300,000 6 375,000
Contribution Margin 200,000 4 250,000
Fixed Cost 150,000 3 150,000
Net Profit 50,000 1 100,000

In order to earn the desired profit, P 100,000, the company need to produced and
sell 62, 500 units and have a net sales amounting to P625,000.

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