MAHM6e Ch16.Ab.az

7/30/2019 MAHM6e Ch16.Ab.az

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16 -1

Cost-Volume-

Profit

Analysis: A

Managerial

Planning Tool

CHAPTER


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16 -2

1. Determine the number of units that must be

sold to break even or earn a target profit.

2. Calculate the amount of revenue required to

break even or to earn a targeted profit.

3. Apply cost-volume-profit analysis in a

multiple-product setting.

4. Prepare a profit-volume graph and a cost-

volume-profit graph, and explain the meaning

of each.

Objectives

Afte

cha

BEP

harus


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5. Explain the impact of risk, uncertainty, and

changing variables on cost-volume-profit

analysis.

6. Discuss the impact of activity-based costing

on cost-volume-profit analysis

Objectives


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Using Operating Income in CVP Analysis

Narrative Equation

Sales revenue

Variable expenses

Fixed expenses

= Operating income


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Sales (1,000 units @ $400) $400,000

Less: Variable expenses 325,000

Contribution margin $ 75,000

Less: Fixed expenses 45,000

Operating income $ 30,000


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$400,000

1,000

$325,000

1,000

0 = ($400 x Units) ($325 x Units) $45,000

Break Even in Units

BEP = Ga rugi , Ga untung

$400 dari total

sales


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Break Even in Units

0 = ($400 x Units) ($325 x Units) $45,000

0 = ($75 x Units)

$45,000$75 x Units = $45,000

Units = 600Proof

Sales (600 units) $240,000

Less: Variable exp. 195,000

Contribution margin $ 45,000


Operating income $ 0

BEP dicapai jika Fixed

expense = Contribution

margin


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Achieving a Targeted Profit

Desired Operating Income of $60,000

$60,000 = ($400 x Units) ($325 x Units) $45,000

$105,000 = $75 x UnitsUnits = 1,400

Proof

Sales (1,400 units) $560,000


Contribution margin $105,000




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Desired Operating Income of

15% of Sales Revenue

0.15($400)(Units) = ($400 x Units) ($325 x Units) $45,000

$60 x Units = ($400 x Units) $325 x Units) $45,000

Units = 3,000

Targeted Income as a Percent of Sales Revenue

$60 x Units = ($75 x Units) $45,000

$15 x Units = $45,000


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Net income = Operating income Income taxes

= Operating income (Tax rate x Operating income)

After-Tax Profit Targets

= Operating income (1 Tax rate)

Or

Operating income = Net income(1 Tax rate)


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$48,750 = Operating income (0.35 x Operating income)

$48,750 = 0.65 (Operating income) (1-0,35 = 0,65)


$75,000 = Operating income

If the tax rate is 35 percent and a firm wants

to achieve a profit of $48,750. How much is

the necessary operating income?

= Operating income (Tax rate x Operating income)

= Operating income (1 Tax rate)


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16 -12


How many units would have to be sold to

earn an operating income of $48,750?

Units = ($45,000 + $75,000)/$75

Units = $120,000/$75

Units = 1,600Proof

Sales (1,600 units) $640,000


Contribution margin $120,000



Less: Income tax (35%) 26,250

Net income $ 48,750

$4$7

(F

inco


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Break-Even Point in Sales Dollars

First, the contribution margin

ratio must be calculated.

Sales $400,000 100.00%

Less: Variable

expenses 325,000 81.25%

Contributionmargin $ 75,000 18.75%

Less: Fixed exp. 45,000



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16 -14

Break-Even Point in Sales Dollars

Given a contribution margin ratio of 18.75%, how

much sales revenue is required to break even?

Operating income = Sales Variable costs Fixed costs

$0 = Sales (Variable costs ratio x Sales) $45,000

Sales = $240,000

$0 = Sales (1 0.8125) $45,000

Sales (0.1875) = $45,000


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Relationships Among Contribution

Margin, Fixed Cost, and Profit

Contribution Margin

Total Variable Cost

Revenue

Fixed Cost

Fixed Cost = Contribution Margin


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Contribution Margin

Total Variable Cost

Revenue

Fixed Cost

Fixed Cost < Contribution Margin maka selisihnya profit

Profit


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Contribution Margin

Total Variable Cost

Revenue

Fixed Cost

Fixed Cost > Contribution Margin maka selisihnya loss

Loss


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Profit Targets and Sales Revenue

How much sales revenue must a firm generate to

earn a before-tax profit of $60,000. Recall that

fixed costs total $45,000 and the contribution

margin ratio is .1875.Sales = ($45,000 + $60,000)/0.1875

= $105,000/0.1875

= $560,000

Operating income = Sales Variable costs Fixed costs


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Multiple-Product Analysis

Mulching Riding

Mower Mower Total

Sales $480,000 $640,000 $1,120,000

Less: Variable expenses 390,000 480,000 870,000Contribution margin $ 90,000 $160,000 $ 250,000

Less: Direct fixed expenses 30,000 40,000 70,000

Product margin $ 60,000 $120,000 $ 180,000

Less: Common fixed expenses 26,250



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Income Statement: B/E Solution

Mulching Riding

Mower Mower Total

Sales $184,800 $246,400 $431,200

Less: Variable expenses 150,150 184,800 334,950Contribution margin $ 34,650 $ 61,600 $ 96,250

Less: Direct fixed expenses 30,000 40,000 70,000

Segment margin $ 4,650 $ 23,600 $ 26,250

Less: Common fixed expenses 26,250Operating income $ 0


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The profit-volume graph portraysthe relationship between profits

and sales volume.


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Example

The Tyson Company produces a single product

with the following cost and price data:

Total fixed costs $100Variable costs per unit 5

Selling price per unit 10


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Profit-Volume Graph

Profitor Loss

Loss

(40, $100)I = $5X - $100

Break-Even Point(20, $0)

$100

80

60

40

20

0

- 20

- 40

-60

-80

-100

5 10 15 20 25 30 35 40 45 50| | | | | | | | | |

Units Sold

(0, -$100) Fixed cost

BEP 20, jika memproduksi

20 maka tidak untung tidak

rugi.

Jika memproduksi 40 ,perusahaan untung 100


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The cost-volume-profit graphdepicts the relationship among

costs, volume, and profits.


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Cost-Volume-Profit Graph

Revenue

Units Sold

$500 --

450 --

400 --

350 --

300 --

250 --

200 --

150 --

100 --

50 --

0 --5 10 15 20 25 30 35 40 45 50 55 60| | | | | | | | | | | |

Total Revenue

Total Cost

Loss

Break-Even Point

(20, $200)

Fixed Expenses ($100)

Variable Expenses($5 per unit)


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Assumptions of C-V-P Analysis

1. The analysis assumes a linear revenue function and a

linear cost function.

2. The analysis assumes that price, total fixed costs, and

unit variable costs can be accurately identified andremain constant over the relevant range.

3. The analysis assumes that what is produced is sold.

4. For multiple-product analysis, the sales mix is assumed

to be known.

5. The selling price and costs are assumed to be known

with certainty.

gr

d

be

bi


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$

Units

Total Cost

Total Revenue

Relevant Range

Relevant Range

Garis

me

sem

tota


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16 -28Alternative 1: If advertising expenditures increase by

$8,000, sales will increase from 1,600 units to 1,725 units.

BEFORE THE WITH THE

INCREASED INCREASEDADVERTISING ADVERTISING

Units sold 1,600 1,725

Unit contribution margin x $75 x $75

Total contribution margin $120,000 $129,375Less: Fixed expenses 45,000 53,000

Profit $ 75,000 $ 76,375

DIFFERENCE IN PROFIT

Change in sales volume 125

Unit contribution margin x $75

Change in contribution margin $9,375

Less: Change in fixed expenses 8,000

Increase in profits $1,375


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BEFORE THE WITH THEPROPOSED PROPOSED

CHANGES CHANGES


Unit contribution margin x $75 x $50Total contribution margin $120,000 $95,000

Less: Fixed expenses 45,000 45,000

Profit $ 75,000 $50,000

Alternative 2: A price decrease from $400 to $375 per

lawn mower will increase sales from 1,600 units to 1,900

units.


Change in contribution margin $ -25,000

Less: Change in fixed expenses --------

Decrease in profits $ -25,000


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BEFORE THE WITH THE

PROPOSED PROPOSED

CHANGES CHANGES


Unit contribution margin x $75 x $50Total contribution margin $120,000 $130,000

Less: Fixed expenses 45,000 53,000

Profit $ 75,000 $ 77,000

Alternative 3: Decreasing price to $375and increasing

advertising expenditures by $8,000 will increase sales from

1,600 units to 2,600 units.


Change in contribution margin $10,000

Less: Change in fixed expenses 8,000

Increase in profit $ 2,000


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Margin of Safety

Assume that a company has the following projectedincome statement:

Sales $100,000

Less: Variable expenses 60,000Contribution margin $ 40,000


Income before taxes $ 10,000

Break-even point in dollars (R):

R = $30,000 0.4 = $75,000

Safety margin = $100,000 - $75,000 = $25,000

R = Fi

Rasio C

Sales

u


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Degree of Operating Leverage (DOL)

DOL = $40,000/$10,000 = 4.0

Now suppose that sales are 25% higher than projected. What is

the percentage change in profits?

Percentage change in profits = DOL x percentage change in

sales

Percentage change in profits = 4.0 x 25% = 100%

25% dari soalnya bkn diketahui


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Proof:

Sales $125,000

Less: Variable expenses 75,000Contribution margin $ 50,000


Income before taxes $ 20,000

Degree of Operating Leverage (DOL)


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CVP and ABC

Assume the following:Sales price per unit $15

Variable cost 5

Fixed costs (conventional) $180,000

Fixed costs (ABC) $100,000 with $80,000 subject to ABC analysisOther Data:

Unit Level of

Variable Activity

Activity Driver Costs DriverSetups $500 100

Inspections 50 600


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BEP = $180,000 $10

= 18,000 units

CVP and ABC

1. What is the BEP under conventionalanalysis?

$10 dari

22


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CVP and ABC

2. What is the BEP under ABC analysis?

BEP = [$100,000 + (100 x $500) + (600 x

$50)]/$10

=18,000 units $


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BEP = [$100,000 + (100 x $450) + (600 x $40)]/$10

= 16,900 units

3. What is the BEP if setup cost could be reduced to$450 and inspection cost reduced to $40?

CVP and ABC

$


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The End

Chapter Sixteen

MAHM6e Ch16.Ab.az

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