This document discusses a student's report on cost-volume-profit (CVP) analysis of ACI Formulation Limited, a Bangladeshi manufacturing company. It provides details of the company's revenues, costs, contribution margin, break-even point, margin of safety, and degree of operating leverage based on CVP analysis. The analysis finds that the company's variable costs are high at 75.12% of revenues, resulting in a low break-even point of 59.16% of revenues and a high margin of safety. It also determines that the company has low operating leverage, meaning profits are not highly sensitive to changes in sales volume.

2.  Md. Enamul Islam Shemul
 Student of Patuakhali Science and Technology
University
 Faculty of Business Administration and
Management
 Session 2013-14

4. Cost-volume profit analysis is used to determine
how changes in cost and volume affect a company’s
operating income and net income. In performing
this analysis, there are several assumptions made,
including; Everything produced is sold, Costs are
only affected because activity changes, If a
company sells more than one product, they are sold
in the sales mix, CVP analysis requires that all the
company’s cost, including manufacturing, selling,
and administrative costs, be identified as variable
or fixed.

5.  To get an overall concept of cost volume
profit analysis.
 To know about the application of cost volume
profit analysis.
 To know about the practical knowledge that
is how a company practices CVP analysis.
 To know the uses of contribution margin,
breakeven analysis, margin of safety, degree
of operating leverage etc.

6.  Being assigned with the report’s topic.
 Discussing the topic with our group
members.
 Collecting data through Secondary source
 Preparing the final report.
 Submitting the report to our course teacher

7.  The company do not do not keep record on
unit basis rather total basis
 The company do not interested to make CVP
analysis
 As the company produce different product we
faced many difficulties to accumulate the
expenses.

8. ACI formulation Limited (ACI FL):
 ACI formulation Limited (ACI FL) is a type of manufacturing
company.
 ACI limited, located at Gazipur in the out skirt of Dhaka.
 ACI FL manufactures majority of the products of ACI
Strategic Business Limited except for the Pharmaceutical
Division.
 The factory is equipped with the state of the art facilities
for product formulations and process innovation.
 The product range manufactured at ACI FL include Crop
Protection Chemicals like Insecticides, herbicides and
fungicides in granular, powder and liquid, mosquito
pesticides in the forms of aerosols, vaporizers and coils,
house hold chemicals like toilet cleaners and hand wash.

9.  ACIFL introduced the concept of quality
management system by being the first company
in Bangladesh to achieve ISO 9001 certification in
1995 and follows the policy of continuous
improvement in all its operations.
 The company has current market share in tk450
million, its earning per share is in tk2.87 and
profit after tax is 129.23 million (in taka),
dividend rate is 25%.
 The management of ACI, a competent team of
professionals, thus operates with a progressive
attitude to provide effective solutions to satisfy
the customer’s’ needs, through its products and
services of uncompromising quality.

10.  Cost-volume-profit : Cost-volume-profit
analysis is a powerful tool that helps
managers to understand the relationships
among cost, volume and profit.
 Contribution Margin: Contribution margin is
the amount remaining from sales revenue
after variable expenses have been deducted.
 Contribution Margin Ratio: The contribution
margin as a percentage of sales is referred to
as the contribution margin ratio.
CM ratio =
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛
𝑆𝑎𝑙𝑒𝑠

11.  Break Even Point: The level of sales at which
company’s profit is zero. Break-even point (BEP)
is the point at which total cost and total revenue
are equal: there is no net loss or gain.
Sales = Variable expense + Fixed expense+
Profit
 Margin of Safety: The margin of safety is the
excess of budgeted or actual sales dollar over the
break -even volume of dollar.
Margin of safety = Total budgeted (or actual)
sales –Break even sales

12.  Margin of safety Ratio:
The margin of safety ratio =
𝑚𝑎𝑟𝑔𝑖𝑛 𝑜𝑓 𝑠𝑎𝑓𝑒𝑡𝑦 𝑖𝑛 𝑑𝑜𝑙𝑙𝑎𝑟𝑠
𝑡𝑜𝑡𝑎𝑙 𝑏𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑜𝑟 𝑎𝑐𝑡𝑢𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑖𝑛 𝑑𝑜𝑙𝑙𝑎𝑟
 Operating Leverage: A measurement of the degree to which a
firm or project incurs a combination of fixed and variable costs.
 Degree of operating leverage: The degree of operating leverage
at a given level of sales is computed by the following formula:
Degree of operating leverage=
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛
𝑛𝑒𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒

13. Segregation of expenses
Manufacturing Expenses 176,198,937
(Less :) Fixed Manufacturing Expenses
Rent, rates and fees 476,027
Promotional expenses 47,105
Entertainment 392,683
Vehicle maintenance 1,623,937
Insurance 3,141,529
Depreciation 44,390,492
Training expenses 54,098
Product development expenses 9,637
Printing and stationery 586,124
Postage, telephone, fax etc. 468,583
Donation and subscription 219,930
Repair and maintenance 20,841,519
Fixed manufacturing cost 72,251,664
Variable Manufacturing Cost 103,947,273
Administrative, selling and distribution expenses 346,726,896
(Less:) Variable Administrative, selling and distribution expenses
Truck and handling 6,342,632
Doubtful debts 21,131,743
Travelling and Conveyances 47,019,249
Variable Administrative, selling and distribution expenses 74,493,624
Fixed Administrative, selling and distribution expenses 272,233,272

14. Actual Cost of Produced Goods
Cost of Sales 1,755,875,3
25
(Less) Manufacturing Expenses 176,198,937
Cost of Produced Goods 1,579,676,3
88

15. Fixed Cost
Fixed manufacturing cost 72,251,664
Fixed Administrative, selling and distribution expenses 272,233,272
Total Fixed Cost 344,484,936
Variable Cost
Cost of Produced Goods* 1,579,676,388
Variable Manufacturing Cost 103,947,273
Variable Administrative, selling and distribution expenses 74,493,624
Total Variable Cost 1,758,117,285

16. CVP analysis
Revenue 2,340,431,716 100.00%
(Less :) Variable Cost 1,758,117,285 75.12%
Contribution Margin 582,314,431 24.88%
(Less :) Fixed Cost 344,484,936 14.72%
Net Operating Income 237,829,495 10.16%
Break Even Point (in Taka)* 1,384,550,042
59.16%
`Margin of Safety* 955,881,674
40.84%
Degree of Operating Leverage* 2

17.  As we can see, the CM ratio is 24.88%.
Because it is a manufacturing company and
most of its product includes variable cost.
That is why, the contribution margin is low. It
is showing that, the company has less effect
on changes in revenue.
The break-even point is calculated by using
following equation-
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛

18.  The BEP is low in respect of the revenue and
cost they had incurred. As the variable cost is
75.12% of revenue. So the BEP point is low at
59.16% of total revenue. So the safety margin
is high at 40.84% of total revenue. It implies
that, the company has less risk in respect of
revenue variability but it has low return in
respect of their unit sales.
 DOL is 2.00 showing that, the company is
less risky to the changes in sales due to the
high involvement of variable cost.

19.  As it is a manufacturing company its variable
expense is greater than fixed cost
 The company’s net income is less volatile to
changes in sales
 As variable expense is higher the break-even
is low.
 As the BEP is low the safety margin is high.

20.  If the company increase fixed cost and
decrease variable cost then its profit will also
be increased
 The company can decrease variable cost by
decreasing product cost

21. CVP analysis is based on a simple model of how
profit s response to price, costs, and volume.
This model can be used to answer a variety of
critical questions such as what is company’s
break-even point or volume, what is its margin
of safety and what is likely to happen if changes
are made in price, costs, and volume. Thus this
analysis helps a company to get its actual net
operating income.