Introduction:

CVP Analysis: Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there are several assumptions made, including: Sales price per unit is constant. Variable costs per unit are constant. Total fixed costs are constant. Everything produced is sold. Costs are only affected because activity changes. If a company sells more than one product, they are sold in the same mix.

Managers need to estimate future revenues, costs, and profits to help them plan and monitor operations. They use cost-volume-profit (CVP) analysis to identify the levels of operating activity needed to avoid losses, achieve targeted profits, plan future operations, and monitor organizational performance. Managers also analyze operational risk as they choose an appropriate cost structure. CVP analysis requires that all the company's costs, including manufacturing, selling, and administrative costs, be identified as variable or fixed. Contribution margin and contribution margin ratio The contribution margin represents the amount of income or profit the company made before deducting its fixed costs. Said another way, it is the amount of sales dollars available to cover (or contribute to) fixed costs. When calculated as a ratio, it is the percent of sales dollars available to cover fixed costs. Once fixed costs are covered, the next dollar of sales results in the company having income.

The contribution margin is sales revenue minus all variable costs. It may be calculated using dollars or on a per unit basis. Break-even point The break-even point represents the level of sales where net income equals zero. In other words, the point where sales revenue equals total variable costs plus total fixed costs, and contribution margin equals fixed costs. Targeted income CVP analysis is also used when a company is trying to determine what level of sales is necessary to reach a specific level of income, also called targeted income. To calculate the required sales level, the targeted income is added to fixed costs, and the total is divided by the contribution margin ratio to determine required sales dollars, or the total is divided by contribution margin per unit to determine the required sales level in units. CVP-Graph:

Objective of Study:
Primary objective:
To fulfill the course requirement. To acquire knowledge.

Secondary Objective:
To get an idea about the road side business. To get an idea about the financial performance of the business. Analysis and evaluate the cost volume profit analysis of that business.

Methodology:
To prepare this report, we used primary data. We have collected all those data from the proprietor of the business.

Limitation:
Limitation is a usual part of report analysis. Whenever any report is going on to analyze, there are several lacking to find out the result of the particular topic. To make this report, we also faced some problems. Time constrains was another problem. But while preparing the report we came to learn lots of practical things and have gathered practical knowledge and finally we have enjoyed a lot to prepare the whole paper work.

Company Profile:
Shahbuddin Tea Stall is a renowned tea stall located in Munsurabad R/A, Adabor, Shamoli, Dhaka. Its owner name is Shahbuddin. He is only man who makes tea & served another thing. It has two benches & one chair. There is one big box for protect the fire of stove from the air. His stall is decorated with one stove, Two Aluminum tea pot, 12 cups, two or three spoon & a pot for making tea. Some sweet, cake, bread are displayed by hanging them in packet on his stall. The stall has one water purifying machine for serving pure water. He everyday sell about 250 cup tea, 50 sweet, 60 paces of cake.

List of product: Tea dust Sugar Milk Oil Water bottle Cake Banana Sweet Biscuit Other Cost Glass Stove and etc Box Chair & Bench Water purifying machine Tea pot Electricity Light Rent

Per day 0.4kg 1.5kg 5 Tin 1.5 liter 2 bottle 52 pieces 100 pieces 35 pieces 50 pieces

Price 114/90/240/100/80/200/300/80/70/180/1,800/600/1,150/7,400/600/200/200/1,500/-

Variable cost (For one month):

Product: Tea dust Sugar Milk Oil Water bottle Cake Banana Sweets Biscuit Total

Purchasing cost 3,400/2,700/7,200/3,000/2,400/6,000/9,000/1,650/2,100/37,450/-

Fixed cost:
Product: Glass Stove Burner Box Chair & Bench Water Purifier Machine Electricity Bill Expense Tea Pot Electric Bulb Rent Expense Total Cost 180/1,800/600/1,150/7,400/200/600/200/2,000/14,130/-

Unit of Production:
Item Tea Cake Banana Sweets Water bottle Per day 200cup 52 pieces 100 pieces 35 pieces 2 bottle Month 6,000 cups 1,560 pieces 3,000 pieces 1,050 pieces 60 bottle Unit Price 5.0/cup 5.00/piece 5.00/piece 3.00/sweet 55.00/jar Selling Price 30,000 7,800 15,000 3,150 3,300

Biscuit Total

50 pieces

1500 pieces

3.00/unit

4,500 63,750

Analysis:
Helal Tea stall produced has a single product & sell 5 product. This information are taken from the original data those are flowing: Sell: 6,000 cup tea, 1,560 pieces cake, 3000 pieces banana, 1,050 pieces sweets, 60 water bottle & 1500 pieces Biscuit =13,170 units Selling price per unit (63,750/13,170) = 4.8405/- per unit Variable cost per unit (37450/13170) = 2.8435/- per unit Fixed Cost 14130 Taka Contribution Margin (4.8405-2.8435) = 1.9969/- per unit

We separated the variable and fixed expenses from original data: Sales (13,170*4.8405) Less: Variable cost (13,170*2.8435) Contribution (13,170*1.9969) Less: Fixed cost Net operating income Tk.63,750 Tk.37,450 Tk.26,300 Tk.14,130 Tk.12,170

Contribution margin ratio(C/M ratio): To compute change in contribution margin and net operating income resulting from change in sales volume: C/M ratio = Contribution per unit /Sales per unit =1.9969/5 =39.9938% Here c/m ratio 39.9938% means that for each volume increase in sales.

BEP sales in units: Break even sales as the level of sales at which the companys profit is zero. BEP sales in units = Fixed cost/Contribution per unit =14,130 / 1.9969 = 7,076 units

BEP sales in volume = 7,076 units*4.8404 = Tk. 32,250.6704

Degree of operating leverage: The degree of operating leverage is a measure at a given level of sales of how a percentage change in sales volume will be affect profits. Degree of operating leverage = Contribution Margin / Net operating Income =26,300 / 12,170 =2.16105 times Here, degree of operating leverage is 2.16105 the tea Stall net operating Income grows 2.5386 times as fast its sales. Assume set the farm target profit is Tk.20, 000.How many units would have to be sold? Target sales in units: (Fixed cost + Target profit)/ Contribution per unit = (14,130 + 15,000) / 1.9969 =14,588 units

Conclusion:
Cost volume profit (CVP) measure how volume is the company product volume unit. If the company produces less than BEP the company must be loss and the company produce more than the company must be earn profit. As because CVP analysis helps managers understand the interrelationships among cost, volume, and profit it is a vital tool for taking business decisions. In this report analysis we have found that Mr. Shahbuddin take the decision about the profitably condition of his business, that if he wants to make a profit of Tk. 20000.00, he have to sell a amount of 14588 unit of product which is larger than his existing sells unit that is 13170 units. In this report we tried to find out the cost and profit In conclusion, we would like to say that, it was a great experience to do this report. We actually got to know a lot of things. The things we study at classroom are not only bookish things rather they are being implemented in real world. We tried to cover all ratio of analysis the financial statement. But let that not be any excuse rather we take all the blame on my shoulder regarding any flaw of this report.