Asian Journal of Management Entrepreneurship and Social Science

ISSN: 2808 7399

https://ajmesc.com/index.php/ajmesc Volume 03 Issue 02

Cost Volume Profit (CVP) Analysis As A Profit Planning Tool At

Lay Cang MSMEs
Mohamad Bastomi1, Sudarmiatin2, Agus Hermawan3

1Studentof the Doctoral Program in Management Science, Faculty of Economics and

Business, Universitas Negeri Malang and Lecture of Universitas Islam Malang, Indonesia
2,3Faculty of Economics and Business, Universitas Negeri Malang, Indonesia

*Coresponding author: [email protected]

Abstract
Having a strategic role in aspects of economic growth does not guarantee that MSMEs
are able to manage their businesses well. Financial management in a business is an important
factor that must be studied and improved in order to improve the quality of business
management. In order to obtain optimal profits, business actors need to carry out profit
planning related to components that can affect profits, such as costs, sales volume and
production. One of the analytical tools used is using cost, volume and profit analysis or
commonly referred to as Cost Volume Profit (CVP) analysis. The purpose of this study is to
analyse financial management related to cost volume profit at Lay Cang MSMEs. In general,
MSMEs do not understand the level of sales that must be maintained so as not to experience
losses by taking into account the costs incurred for production. The method used is a descriptive
qualitative method with a literature review approach complemented by direct interviews with
the managers of Lay Cang MSMEs. Based on the results of research using Cost Volume Profit
analysis, information was obtained that the revenue obtained by Lay Cang MSMEs was able to
cover variable costs and fixed costs. The application of cost volume profit (CVP) analysis helps
Lay Cang MSMEs in estimating the maximum profit and knowing how many units of total sales
and revenue must be obtained in order to reach the Break Event Point.

Keywords: Profit Planning, Cost, Volume, Profit, Lay Cang MSMEs

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1. INTRODUCTION
Micro, Small and Medium Enterprises (MSMEs) have a strategic role and position in
the economy in Indonesia. MSMEs play a role in creating jobs and driving the economy.
Malang City has approximately 8,000 Micro, Small and Medium Enterprises (MSMEs)
(https://malangkota.go.id/). The partisanship of the Malang City Government towards local
MSMEs is evident and continues to be strengthened, including the issuance of Circular Letter
of the Mayor of Malang City Number 5 of 2021 concerning the priority use of micro, small
and medium enterprise products. The MSME sector is considered capable of being relied
upon in the future because it is able to survive the economic crisis and has great potential.
The characteristics of MSMEs in Indonesia are labour-intensive and technologically simple
sectors, which are able to create jobs for Indonesian citizens, thus equalising income, and
also helping Indonesia in various economic aspects.
Having a strategic role in aspects of economic growth does not guarantee that MSMEs
are able to manage their businesses well. With the increasing development of the business
world in recent years, competition between businesses has certainly increased. One of the
benchmarks for business success and success is how the business survives the competition.
In order for businesses to continue to compete, of course, business actors must have good
planning in terms of sales and costs used to generate optimal profits. In order to obtain
optimal profits, business actors need to carry out profit planning related to components that
can affect profits, such as costs, sales volume and production. Lack of knowledge in preparing
a prudent, scientific, alternative income level projection financial plan leads to the
destruction of dreams of starting an innovative business. (Thottoli, 2021).
Businesses engaged in the field of processed food and beverages in their business
activities are oriented to achieve company goals such as maximising profit, maintaining the
life of the company, producing company growth towards a better direction and creating the
welfare of internal and external members of the company. Decisions regarding the main
objective in the company are to maximise profit, so that to obtain maximum profit the
company must be able to target how much profit will be achieved and the company must
also think about how to achieve the expected profit as much as possible. Managers must be
able to make a good plan in order to make use of resources that are arranged in an organised
and controlled manner. One of the analytical tools used is using cost, volume and profit
analysis or commonly referred to as Cost Volume Profit (CVP) analysis. Okpala & Osanebi
(2020) found that CVP analysis is wise about profit planning among entrepreneurs as a

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means of solving problems such as the inability to obtain sustainable income for business
continuity issues.
Cost volume profit analysis (CVP Analysis) is an important management tool for
enterprises to forecast, make decisions, and control costs, and plays an important role in
enterprise management. (Guo, 2022). This CVP analysis emphasises the relationship
between costs, sales quantity and selling price, and all the financial information contained
therein. An important component in the calculation of CVP analysis lies in the use of variable
costs and fixed costs. (Fuksa et al., 2017).. CVP analysis can provide assistance to businesses
or in this case MSMEs to determine profit targets. Decision makers can use CVP to determine
the sales volume required to achieve targeted profits despite changes in sales prices, variable
costs, or fixed costs. (Liang et al., 2021). There are several analytical tools to determine profit,
namely calculating the Break Event Point (BEP), Contribution Margin, Margin of Safety, and
Degree Of Operating Laverage.
In Malang City, there is a special food made from peanuts and soybeans that has been
known by the local community as "tempe bungkil". Tempe bungkil can be used as an
alternative culinary business and its potential as a functional food. As an effort to develop
the entrepreneurial spirit for students, Anwarul Huda Islamic Boarding School formed a
business unit called Lay Cang. The Lay Cang business unit produces tempe meal and
processes it into foods that are rich in nutrition. The Lay Cang Business Unit was established
on 23 July 2019. The production to sales process is carried out directly by the students
themselves so that it becomes a real practice for students to do business while in pesantren.
The distinctive flavour makes tempeh cake very popular with residents around the
pesantren. The produced tempeh cake has a savoury taste, no smell, no bitterness, and is also
whiter. In addition, the ingredients used are also pure without any mixture of preservatives,
flavourings, or colourings so it is very safe.
In 2020, the Covid-19 pandemic caused almost all MSME activities to stop completely.
Despite implementing PSBB, Lay Cang MSMEs have proven to be able to survive until now.
Profits from MSME productivity are not always the same every month. This also happens to
the financial condition of Lay Cang MSMEs, which is stagnant and does not experience
development. Lay Cang MSMEs do not yet have standards in conducting cost analysis,
especially production costs. So far, the business has only recorded expenses without
separating fixed costs and variable costs. When businesses want to maintain their
production capacity, they need to focus on controlling variable costs in order to manage

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production price levels. (Stoenoiu, 2018). In contrast to fixed costs that tend to be under
control.
From the above phenomenon, the author is interested in conducting a CVP analysis
to assist Lay Cang MSMEs in making expected profit planning by integrating factors that can
affect costs, sales volume and profits earned. The purpose of this study is to identify the
variables that affect the company's profit and then observe the dependency relationship
between these variables.

2. LITERATURE REVIEW
2.1 Definition of Cost Volume Profit Analysis
Cost Volume Profit analysis is important financial information for companies used to
identify economic and business conditions, a division or department in overcoming
problems. (Palupi & Wulan, 2021). Cost Volume Profit analysis is the key to understanding
cost behaviour. (Rahmayuni & Masmuddin, 2019).. Cost Behaviour shows the reaction of
costs to the company's activities, if activities increase or decrease, certain costs will increase
or decrease or even remain fixed (Garrison et al., 2014). (Garrison et al., 2014). The benefit
of Cost Volume Profit analysis is to make accurate calculations of profit planning and sales
budgets for a business. According to Sumarni (2020) Profit planning or profitability
optimisation is the development of a work plan for company operations expressed in a
calculation. Profit planning is useful to assist management in planning, budgeting and
decision making both short and long term in order to achieve company goals.

2.2 Cost, Volume, and Profit Relationship

According to PPurwanto & Watini (2020) cost is a sacrifice of economic resources to
achieve certain goals that are beneficial at this time or in the future. According to Putra
(2017) sales volume is the number of units sold of a specified product in a certain period.
Sales volume affects company profits, if the sales volume in the company increases, the
greater the opportunity for the company to make a profit and vice versa when profits are
small it is also influenced by the small sales volume. With sales volume can also be used as a
tool to evaluate the state of the company. According to (Hassanah et al., 2019) profit is the
difference between total income and total costs incurred in a business activity. So that profit
in CVP analysis is total sales minus total costs.
According to Belmo & Neno (2020) the relationship between the concepts of cost,
volume, and profit in profit planning can be used to calculate break-even points, profit
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targets, safety margins, cost composition to maximise contribution margins, and or

anticipate business closure points. Contribution margin serves to calculate how much return
on capital that has been spent by the company (Dewi et al., 2017). (Dewi et al., 2017). The
relationship between costs, volume, and profit of a company with a focus on the five main
elements in CVP analysis, namely: product selling price, sales volume or activity level,
variable cost per unit, total fixed cost, and product sales mix. A changing selling price that
does not affect other costs and budgets has an impact on the quantity of products sold, profit,
and break-even. An increase in fixed costs results in a decrease in net profit and break-even
(BEP). Changes in variable costs per unit will affect the amount of contribution margin, this
will have an impact on changes in net profit and break-even level (BEP). An increase in sales
volume causes the contribution margin and net profit to rise.

2.3 Break Event Point Analysis

Break Event Point is a situation where in the company's operations, it does not make
a profit and does not suffer a loss. (Luntungan & Tinangon, 2021). Break Event Point becomes
a level, at which the amount of costs is equal to the amount of revenue. (Maruta, 2018). Break
Event Point analysis can be calculated using the formula:
Break-even point in units:
𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑒𝑙 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

Break-even point in rupiah:

𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑅𝑎𝑡𝑖𝑜

2.4 Determine the Contribution Margin ratio

Contribution Margin is the difference between sales and variable costs (Rosianna et
al., 2021). Contribution Margin ratio analysis can be calculated using the formula:
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

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2.5 Determining Margin of Safety in rupiah

Margin of Safety is a safety limit for the company in the event of a decline in sales, no
matter how much the decline in sales occurs as long as within these limits the company will
not suffer losses (Devi et al., 2023). Margin of Safety analysis can be calculated using the
formula:
𝑆𝑎𝑙𝑒 𝑎𝑡 𝑡ℎ𝑖𝑠 𝑡𝑖𝑚𝑒 − 𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑎𝑐ℎ𝑒𝑑 𝐵𝐸𝑃 𝑅𝑢𝑝𝑖𝑎ℎ

2.6 Determining the Degree of Operating Laverage

Operating Leverage is the use of fixed costs to increase changes in the level of higher
profits when sales activity changes (Triana et al., 2020). Degree of Operating Laverage
analysis can be calculated using the formula:
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡

3. RESEARCH METHOD
The type of research used in this research is a type of qualitative research with a field
study approach. In this study, researchers conducted descriptive research that attempted to
describe the actual situation in the field. The qualitative method is one of the research
methods that aims to gain an understanding of reality through an inductive thinking process.
The data analysis carried out is inductive based on the facts in the research field and is
constructed into a theory.
Through qualitative research, researchers can recognise the object under study, feel
what is in the field. The author in obtaining data is by qualitative means through interviews
with students who manage Lay Cang MSMEs. The author conducts observations and
interviews related to business descriptions, and how Mrs Ramlah estimates profit. In
conducting interviews, the author used unstructured interview techniques to make it easy
for the seller to understand. The author recaps what information needs to be explored, then
asks during the interview. In addition to interviews, the author also took pictures for
documentation of activities. This research was conducted at Lay Cang MSMEs located at Jalan
Raya Candi III / 454 Karangbesuki, Sukun District, Malang City by analysing businesses
related to profit planning with Cost Volume Profit analysis.

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4. RESULT and Discussion

4.1 Business De scription
Islamic boarding schools are educational institutions that are consistent in
developing the character and knowledge of students (santri). Anwarul Huda Islamic
Boarding School is one of the Islamic Education Institutions located in Malang City. The
institution offers a comprehensive education model that emphasises spiritual, scientific,
social and economic values. PP Anwarul Huda hopes that the alumni produced will become
agents of change who can contribute to improving the welfare of the community. One form
of programme implementation owned by this institution is the existence of a business unit.
The business unit is a forum that houses santri to foster the spirit of entrepreneurship or the
ability and enthusiasm to start a business. Currently, santri have the potential to become
successful entrepreneurs and help build the community's economy. Pesantren alumni are
considered capable of combining religious and business knowledge to build quality
businesses and contribute positively to society.
Lay Cang MSME is a business unit owned by Anwarul Huda Islamic Boarding School.
All business operations are run directly by the students, starting from the production process
to sales. Lay Cang produces organic-based soybean tempeh without preservatives. The
production process is carried out in the afternoon, while the sales process is carried out in
the morning. This MSME targets local residents as the main buyers. The level of risk in this
business is quite low judging from the production and sales process. Average sales per day
reach 40 pieces of tempeh with a selling price of Rp 2,500. Every day the products sold are
not necessarily exhausted. If the remaining tempeh is not processed, it will become stale. The
solution to avoid losses is to fry the remaining tempeh. Fried tempeh is sold to students at a
price of Rp 2,000 per 3 seeds.
Lay Cang MSMEs use personal capital to fund business operations, and the income
from the business can be used to increase business assets so that production capacity can be
successfully increased. Although the business has been running until now, there are some
shortcomings in business financial management. Lay Cang MSMEs have not classified some
costs incurred, not even recognised as costs such as the use of water, electricity, and others.
The manager of this MSME assumes that only the purchase of raw materials is included in
the cost category. This is certainly a problem in estimating the level of net profit obtained.

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4.2 Application of CVP Analysis in Lay Cang MSMEs

Based on observations and interviews with the manager of Lay cang, it can be seen
that the average sales of tempeh per day is 40 pieces with a selling price of Rp 2,500.
Furthermore, the calculation of sales and gross profit income per year using the costs
incurred, both variable costs and fixed costs. The calculation to find out the total sales units
and annual gross profit income can be done in a way:

a. Search for Total sales units and Revenue (1 day)

It is known that Lay Cang sells an average of 40 pieces of tempeh per day.

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦 × 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑃𝑖𝑒𝑐𝑒

40 × 2.500 = 𝑅𝑝 100.000, −

From the above calculations, it can be seen that the total sales of 40 pieces per day get an
income of IDR 100,000 per day.

b. Find total sales units and revenue (1 week)

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦 × 7 days (1 week)

40 × 7 = 280 𝑝𝑖𝑒𝑐𝑒

𝑇𝑜𝑡𝑎𝑙 𝑢𝑛𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 1 𝑤𝑒𝑒𝑘 × 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒

280 × 𝑅𝑝 2.500 = 𝑅𝑝 700.000, −

From the above calculations, it can be seen that the total sales for 1 week are 280 pieces with
a revenue of IDR 700,000.

c. Search for total sales units and revenue (1 month)

It is known that 1 month is 30 days.

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦 × 30 𝑑𝑎𝑦𝑠

40 × 30 = 1.200 piece

𝑇𝑜𝑡𝑎𝑙 𝑢𝑛𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 1 𝑚𝑜𝑛𝑡ℎ × 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑜𝑐𝑒 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒

1.200 × 𝑅𝑝 2.500 = 𝑅𝑝 3.000.000, −

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From the above calculations, it can be seen that the total sales for 1 month are 1,200 pieces
with a revenue of IDR 3,000,000.

d. Find total sales units and revenue for 1 year (365 days)

𝑇𝑜𝑡𝑎𝑙 𝑢𝑛𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 1 𝑑𝑎𝑦 × 365 𝑑𝑎𝑦𝑠

40 × 365 = 14.600

𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑢𝑛𝑖𝑡𝑠 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟 × 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒

14.600 × 𝑅𝑝 2.500 = 𝑅𝑝 36.500.000, −

From the above calculations, it can be seen that the total sales for 1 year are 14,600 pieces of
tempeh with a revenue of IDR 36,500,000.
Based on the above calculations, the Lay Cang MSME business can determine the total
sales units and gross profit income per year, which does not include expenses incurred while
running the business.

4.3 Cost breakdown

a Variable costs
Variable costs are costs that change proportionally with business activity. Variable
costs are the sum of marginal costs over all units produced. (Assegaf, 2019). The following is
data on variable cost data for Lay Cang MSMEs:

Table.1 Variable Costs

Description Daily Monthly Annual
Soybeans IDR 24,000 IDR720,000 IDR 8,760,000
Nuts Rp12,000 IDR360,000 IDR 4,380,000
Water Rp1,000 IDR 30,000 Rp365,000
Electricity Rp1,000 IDR 30,000 Rp365,000
Plastic Bags IDR 4,000 Rp120,000 IDR1,460,000
Yeast IDR 2,940 IDR88,200 IDR1,073,100
Employee Salary IDR 10,000 IDR 300,000 IDR 3,650,000
LPG Gas IDR 6,700 IDR 201,000 IDR 2,445,500
Flour IDR1,700 IDR 51,000 IDR 620,500

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Cooking Oil 3,750 IDR Rp112,500 IDR1,368,750

Seasoning Mix Rp1,000 IDR 30,000 Rp365,000
Laundry Soap IDR 650 IDR 19,500 IDR237,250
Total IDR68,740 IDR 2,062,200 IDR 25,090,100

Based on the data above, it can be seen that the total variable cost expenditure is IDR
25,090,100 in 2022. To find the value of variable costs per product, it is obtained from daily
variable costs divided by the number of products, namely IDR 1,718.5 rounded up to IDR
1,719 (68,740: 40).

b Fixed costs
Fixed costs are costs that are incurred periodically and the amount is always constant
or fixed, not affected by the size of the business volume or business processes that occur in
that period. (Assegaf, 2019). The following is data on the fixed costs of Mrs Ramlah's
business:

Table 2. Fixed costs

Description Annual Price
Stove IDR 400,000
Large Pan IDR 950,000
Wok IDR 75,000
Scales IDR150,000
A baking tray Rp160,000
Strainer (Serok) IDR 45,000
Spatula IDR 20,000
Large Tub IDR70,000
Medium Tub IDR 80,000
Hose IDR 15,000
Knife IDR 15,000
Large Plastic IDR 17,000
Cleaning Sponge 3,000 IDR
LPG cylinder IDR 270,000
Cutting Board IDR 21,000

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Venue Rental IDR1,000,000

Basket IDR33,000
Table IDR70,000
Plastic Chair IDR 25,000
Basin Strainer IDR 25,000
Total IDR 3,444,000

Based on this data, it can be seen that the total fixed cost in 2022 is IDR 3,444,000.

From the results of the calculation of Mrs Ramlah's business in 2022 regarding total
sales, variable costs and fixed costs, it is then presented in the Income statement table to
make it easier to calculate the Cost Volume Profit analysis.

Table 3. Income Statement for 2022

Description Total
Sales IDR 36,500,000,-
Variable costs IDR 25,090,100,-
Contribution margin IDR 11,409,900
Fixed costs IDR 3,444,000.
Profit IDR 7,965,900

In table 3. contribution margin is used to cover fixed costs, the difference is profit.
Contribution margin analysis shows the ability of production to generate profits. The
calculation of the contribution margin is as follows:

Contribution Margin = sales - variable costs

= IDR 36,500,000 - IDR 25,090,100

= IDR 11,409,900,-
𝒎𝒂𝒓𝒈𝒊𝒏 𝒌𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒔𝒊
Contribution Margin Ratio = %
𝒑𝒆𝒏𝒋𝒖𝒂𝒍𝒂𝒏

Rp 11.409.900,−
= Rp 36.500.000,− %

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= 31,3%

After knowing the contribution of the product to the overall profit, a break-even
analysis can be carried out to determine the level of volume and sales required to reach the
break-even point (BEP). Based on the above data, it can be calculated the Cost Volume Profit
of Lay Cang MSMEs in 2022:

c. Break Even Point Analysis

Break-even point (units):
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑒𝑙 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Rp 3.444.000
= 4.409,7
Rp 2.500 − Rp 1.719
Based on the above calculations, it can be seen that to break even in reaching the unit,
it must be able to sell 4,409.7 rounded up to 4,410 pieces of tempeh so that Lay Cang MSMEs
do not experience losses.

Break-even point in (IDR) :

Find the contribution margin per unit:

𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑒𝑙 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

R𝑝 2.500 − R𝑝 1.719 = R𝑝 781 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛

Find the contribution margin ratio:

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝑅𝑝 781
= 31,24 %
𝑅𝑝 2.500

Based on the above calculations, the contribution margin ratio is very important in
determining business policy, because it shows how the contribution margin can be affected
by total sales. In 2022, Lay Cang MSME has a contribution margin ratio of 31.24%.

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Break-even point in Rupiah

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜
Rp 3.444.000
= 𝑅𝑝 11.024.327,8
31,24%
Based on the above calculations, it can be seen that to break even in rupiah sales, Lay
Cang MSMEs must be able to sell with an income of Rp 11,024,327.8.

Margin of Safety in Rupiah:

The safety limit for MSMEs in the event of a decline in sales can be seen by analysing
the margin of safety (MoS). The calculation of the margin of safety is as follows:

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 − 𝑆𝑎𝑙𝑒𝑠 𝑟𝑒𝑎𝑐ℎ𝑒𝑑 𝐵𝐸𝑃 𝑅𝑝

Rp 36.500.000 − Rp 11.024.327,8 = 𝑅𝑝 25.475.672,2

𝒎𝒂𝒓𝒈𝒊𝒏 𝒐𝒇 𝒔𝒂𝒇𝒆𝒕𝒚
MoS percentage = %
𝑺𝒂𝒍𝒆𝒔

𝑅𝑝 25.475.672,2
= %
𝑅𝑝 36.500.000

= 69,80 %

Based on the results of the Margin of Safety calculation, it provides the maximum
planned sales volume that can decrease, so that the business being run does not suffer
from digression, the maximum decrease that can occur is IDR 25,475,672.2. The greater
the MoS value, the smaller the financial risk.

d. Degree of Operating Leverage

As for the calculation of operating leverage to describe the company's ability to
generate profits from its fixed costs, it shows the rate of growth of net operating income
against sales.

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𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
Rp 11.409.900
= 1,43
Rp 7.965.900

Based on the results of the calculation of Degree of Operating Leverage, it shows that
the contribution margin is 1.43 times the operating profit.
In the profit target analysis, the amount of profit calculated is adjusted to the desired
amount of profit, Lay Cang MSMEs expect a profit of 20%, so the calculation is as follows:
Expected profit (20%) = IDR 7,965,900 + (20% x IDR 7,965,900)

= IDR 9,550,080,-
(𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡+𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑃𝑟𝑜𝑓𝑖𝑡)
Sales (Rp) =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜

(Rp 3.444.000 + 𝑅𝑝 9.550.080 )

= 31,24%

= IDR 41,554,461.1

Based on the above calculations, the planned increase in profit is 20% or Rp

9,550,080, with a target annual sales of Rp 41,554,461.

With the use of cost, volume and profit analysis for short-term profit planning short-
term profit planning, Lay Cang MSMEs can pay attention to costs according to classification
and increase production according to capacity so that fixed costs are also more optimised.
MSMEs can also monitor the use of variable costs to be more efficient to get a greater greater
margin. To achieve the sales target according to the profit target in 2023, business managers
can carry out promotions that are expected to be able to increase sales volume. In addition,
business owners need to minimise production costs so that profit margins can be higher. The
greater the safety margin, the greater the difference between sales and the breakeven point.
This indicates that the company tends to be safer from potential losses.

5. CONCLUSİON
Based on the results of the cost volume profit analysis, it can be concluded that the
revenue earned by Lay Cang MSMEs is able to cover variable costs and fixed costs, this can
be seen from the calculation of net profit of Rp 7,965,900. The number of product units that

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must be sold so that the break event point is 4,410 pieces or Rp 11,024,327.8. If sales are
below the point of closing the business, then the MSME cannot cover cash costs. The
maximum amount of sales target reduction that does not cause Lay Cang MSMEs to suffer
losses is Rp 25,475,672.2. Every 10% change in sales will change revenue by 14.3%. Lay
Cang MSME targets a profit of 20% or Rp 9,550,080 per year with a sales acquisition target
of Rp 41,554,461.1.
The application of cost volume profit (CVP) analysis helps Lay Cang MSMEs in
estimating maximum profit and knowing how many units of total sales and revenue must be
obtained in order to reach the Break Event Point. To form good business financial
management, it is necessary to separate the costs borne into fixed costs and variable costs.
Budget planning is useful for increasing profits and avoiding potential losses.

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