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CVP Analysis Interpretation

The cost profit volume analysis of Premier Cement for the 2019-2020 fiscal year shows total sales of approximately BDT 10.23 billion with a net operating income of BDT 729.10 million after accounting for variable and fixed expenses. The contribution margin per unit is BDT 0.915 million, indicating the amount available to cover fixed costs and generate profit. The break-even analysis reveals that the company needs to sell approximately 2,760.87 million metric tons to cover all fixed expenses.

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5 views2 pages

CVP Analysis Interpretation

The cost profit volume analysis of Premier Cement for the 2019-2020 fiscal year shows total sales of approximately BDT 10.23 billion with a net operating income of BDT 729.10 million after accounting for variable and fixed expenses. The contribution margin per unit is BDT 0.915 million, indicating the amount available to cover fixed costs and generate profit. The break-even analysis reveals that the company needs to sell approximately 2,760.87 million metric tons to cover all fixed expenses.

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sohelaminshakib.pstu
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Cost profit volume analysis of premier cement (data from 2019-2020 annual report – Amount in

BDT mio)
Particulars Total (tk) Per unit (mt) Percentage
(%)
Sales 10,225,107,669 1,622,486 100%
Or, 10,225.108 Or,1.623 mio
mio Mt
Less: Variable (8,957,636,054) (1,428,052) 88%
expenses Or, (8,957.636 Or 1.428 mio
mio) Mt
Contribution 1,267,471,615 194,734 12%
Margin Or, 1,267.472 mio .195 mio mt
Less: Fixed ( 538,369,828)
expenses Or, (538.370 mio)
Net operating 729,101,787
income Or,729.101 mio

Any CVP analysis should always begin with the calculation of the Profits:

Profits = Total Revenues /sales – Total cost

By dividing the costs by its fixed and variable components profits can be expressed as

Profits = Total Revenues / Sales– Total Variable Costs – Total Fixed Costs
=10,225.107 -8,957.636 -538.370
=729.101 mio
Contribution Margin (in dollars)=Total revenue/sales - total variable cost
=10,225.107 -8,957.636
=1,267.472 mio
In the similar way,
contribution margin per unit =Selling price per unit - Variable cost per unit
=1.623-1.428
=.915 mio
much of revenue/sales from each unit that can be applied to the fixed costs can be answered by
the contribution and contribution margin per unit. When sufficient units have been sold in order
to cover all fixed costs then the contribution margin per unit from the remaining sales is a profit.

Break even analysis


1.Equation method
At the break even point profit equal zero,
Sales=Variable expenses + Fixed expenses + profit
Or,Unit Selling price *Quality sold=(Unit variable expenses*Quantity sold)+ Fixed expenses +
profit
Or,1.623*Q=1.428*Q + 538.370 + 0
Or,.195Q=538.370
Then, Q=2760.872 mio mt

2.Equation Margin Method


Has two key equations:
(i)Break even point in units sold=Fixed expenses/unit CM
=538.369/.195
=2760.872 units
(ii)Break even point in total sales dollars= Fixed expenses/CM ratio
=538.370/(10,225.108 -8,957.636)/10,225.107}
=538.370/12%
=4341.694 mio

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