Question

CVP Analysis
Data
Unit sales	20,000	units
Selling price per unit	$60	per unit
Variable expenses per unit	$45	per unit
Fixed expenses	$240,000
Enter a formula into each of the cells marked with a ? below
Review Problem: CVP Relationships
Compute the CM ratio and variable expense ratio
Selling price per unit	?	per unit
Variable expenses per unit	?	per unit
Contribution margin per unit	?	per unit
CM ratio	?
Variable expense ratio	?
Compute the break-even
Break-even in unit sales	?	units
Break-even in dollar sales	?
Compute the margin of safety
Margin of safety in dollars	?
Margin of safety percentage	?
Compute the degree of operating leverage
Sales	?
Variable expenses	?
Contribution margin	?
Fixed expenses	?
Net operating income	?
Degree of operating leverage	?

Answer 1

	Particulars	Amount
	Unit sales	20000
	Selling price(PU)	60
	Variable cost per unit	45
	Fixed cost	240000
	Particulars	Amount	Remarks
	Selling price per unit(SP)	60
	Variable cost per unit(VC)	45
	Contribution margin per unit(CM)	15
	Contribution margin ratio(CM/SP*100)(P/V ratio)	0.25
	Variable cost ratio(VC/SP)	0.75
	Break Even sales( units)	16000
	Break Even sales( $)	960000
	Margin of safety(units)(Sales-BES)	4000	(20000-16000)
	Margin of safety($)(Sales-BES)	240000	(20000*60-960000)
	Computation of Operating Leverage
	Particulars	Units	Amount per unit	Amount
a	Sales	20000	60	1200000
b	Variable expenses	20000	45	900000
c	Contribution margin		15	300000
d	Fixed Expenses			240000
e	Net operating income			60000
f	Operating Leverage(c/e)			5 Times
	Break even sales( in units) = Fixed cost/Contribution per unit
	Break even sales( in $) = Fixed cost/P/V ratio
	Margin of safety=Sales- Break even sales
	Operating Leverage=Contribution/Net operating income(EBIT)
	Variable cost ratio=Variable cost/sales
	Contribution margin ratio=Contribution per unit/Sale value per unit