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

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Lesson 2Cost Volume ProfitAnalysis and Break-even Point
Profitis what remains of the selling price (sales) after allcosts and expenses has been deducted.Costmeans the cost of the product sold or servicesrendered.Expensesrefers to the operating expenses (administrativeand selling expenses) and financial expenses (interest andother finance charges)Lossoccur when the cost and expenses exceed the sellingprice or sales.
Learning OutcomesAt 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 avoid3.Determine the break-even point.4.Solve problems involving break-even point.
Pre-assessment1.You bought a bag for800.00.You spent50.00 for thetransportation in going to the store to buy it.For thefollowing independent cases, determine whether youearn a profit or incurred a loss.Determine how muchyour profit or loss was.
Pre-assessment2.Abigail purchased a suitcase for1,200.She paid120.00 for delivery of the suitcase from the seller to herplace.She asked the help of Bernadette to sell thesuitcase.She promised to give Bernadette150.00 ifBernadette could sell the suitcase for2,000.Bernadettewas able to sell the suitcase for1,900.00 to which Abigailagreed.How much profit did Abigail get?
Let’s StartDetermining profit or loss involves a simple addition andsubtraction.The revenue is a plus item.All expenses areminus 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 FirmA trading or merchandising firm buys goods that it sells.Theaccount used to report the selling price of the merchandise issales.Gross sales refers to the gross sales. Sales discounts and salesreturns and allowances are deducted from the gross sales toarrive at the net sales.How much the seller buys the item is the cost of the item,It istermed cost of goods or cost of sales.An income statement is the financial statement that shows theresult of operation, if it earns a profit or incurs a loss for a givenperiod of time.
Matatag MerchandisingIncome StatementFor the Year Ended June 30 2020Sales117,000.00Less:Cost of Sales59,000.00Gross Profit58,000.00Less: Operating ExpensesCommunication Expense1,000.00Delivery Expense5,000.00Rent Expense5,500.00Salary Expense8,300.00Bad Debts Expense600.00Office Supplies Expense700.00Store Supplies Expense1,500.00Depreciation Expense,Furniture and Equipment1,000.0023,600.00Operating Profit34,400.00Add:Other incomeInterest Income800.00Commission Income1,500.002,300.00Less:Other ExpenseInterest Income1,200.001,100.00NET PROFIT35,500.00
Thecost of salesis the purchase price and other expensesincurred in buying the products that the business has to sellincluding the freight-in or transportation of good it buys forresale.

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