Cost Volume Profit Analysis

• Product Volume Variance it measures the amount of overhead applied to the numbers of units produced
• Production Volume Variance = (Actual Units Produced - Budgeted Product units) x Budgeted Overhead rate per unit
• Production Volume Variance


  It is the difference between the actual number units produced in a period and the budgeted number of units that should have been produced, multiplied by the budgeted overhead rate
• Contribution Margin Per Unit Formula

  Unit selling Price - Variable Cost per unit
• Contribution Margin Ratio

  Contribution Margin Price/ Sales
• Break-Even Point per Units

  Total Fixed Cost/ Contribution Margin per units
• Contribution Margin Ratio


  Shows how the contribution margin will be affected by a given peso change in total sales.
• Break Even Point


  The level of sales volumes where total revenues and total expenses are equal, that is, neither profit or loss.
• Margin of Safety

  • Measures the potential effect of the risk that the sales will fall short of planned levels
• Operating Leverage

  • Effect of the risk that sales will fall short of planned levels as influenced by the relative proportion of fixed to variable manufacturing costs - Ratio of CM to profit
  • Higher value = higher risk; Change in sales will have a relatively greater impact on profit
• Operating Leverage Formula

  Contribution Margin / Profit or Net Operating Income