Lesson 2 CVP and BEP.pdf - Lesson 2 Cost Volume Profit...

Lesson 2
Cost Volume Profit Analysis and Break-even Point

Profit is what remains of the selling price (sales) after all
costs and expenses has been deducted.
Cost means the cost of the product sold or services
rendered.
Expenses refers to the operating expenses (administrative
and selling expenses) and financial expenses (interest and
other finance charges)
Loss occur when the cost and expenses exceed the selling
price or sales.

Learning Outcomes
At the end of the lesson, the learner should be able to:
1. Differentiate profit from loss.
2. Illustrate how profit is obtained and how to avoid
3. Determine the break-even point.
4. Solve problems involving break-even point.

Pre-assessment
1. You bought a bag for ₱ 800.00. You spent ₱ 50.00 for the
transportation in going to the store to buy it. For the
following independent cases, determine whether you
earn a profit or incurred a loss. Determine how much
your profit or loss was.

Pre-assessment
2. Abigail purchased a suitcase for ₱ 1,200. She paid
₱ 120.00 for delivery of the suitcase from the seller to her
place. She asked the help of Bernadette to sell the
suitcase. She promised to give Bernadette ₱ 150.00 if
Bernadette could sell the suitcase for ₱ 2,000. Bernadette
was able to sell the suitcase for ₱ 1,900.00 to which Abigail
agreed. How much profit did Abigail get?

Let’s Start
Determining profit or loss involves a simple addition and
subtraction. The revenue is a plus item. All expenses are
minus items and therefore, deducted from the revenue.
The result is a profit if it is positive and loss if it is a negative.

Income Statement for a Trading Firm
A trading or merchandising firm buys goods that it sells. The
account used to report the selling price of the merchandise is
sales.
Gross sales refers to the gross sales. Sales discounts and sales
returns and allowances are deducted from the gross sales to
arrive at the net sales.
How much the seller buys the item is the cost of the item, It is
termed cost of goods or cost of sales.
An income statement is the financial statement that shows the
result of operation, if it earns a profit or incurs a loss for a given
period of time.

Matatag Merchandising
Income Statement
For the Year Ended June 30 2020
Sales ₱ 117,000.00
Less: Cost of Sales ₱ 59,000.00
Gross Profit 58,000.00
Less: Operating Expenses
Communication Expense 1,000.00
Delivery Expense 5,000.00
Rent Expense 5,500.00
Salary Expense 8,300.00
Bad Debts Expense 600.00
Office Supplies Expense 700.00
Store Supplies Expense 1,500.00
Depreciation Expense,
Furniture and Equipment 1,000.00 23,600.00
Operating Profit 34,400.00
Add: Other income
Interest Income 800.00
Commission Income 1,500.00 2,300.00
Less: Other Expense
Interest Income 1,200.00 1,100.00
NET PROFIT 35,500.00

The cost of sales is the purchase price and other expenses
incurred in buying the products that the business has to sell
including the freight-in or transportation of good it buys for
resale.