Page 23 - Manac Costing Test 1 class slides - 4. Planning And Control

COSTING

Overview

Application of CVP

• Unit information usually indicates a break-even in units and

value/monetary information (eg Rand or a ratio based on rand) a

break-even in Rand.

• The net profit is derived from the units sold in excess of the breakeven

point, i.e. the contribution from the margin of safety sales.

• The margin of safety % indicates by how much sales volume can

decline before the entity makes NIL profit.

• Sensitivity % for other variables in the model indicates how big a

change can be absorbed before the entity makes no profit.

• Δ in selling price/unit

• Δ in variable cost/unit

• Δ in total fixed costs

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