Use of Cvp Analysis in Profit Planning With Special Reference To Janakpur Cigarette Factory

Abstract

Every organization has established for earning profit. Profit and profitability do not just happen at random. It is to be managed by effective managerial skill and optimum utilization of scarce resources. So, companies most require effective profit planning for improve their profitability and financial position. In profit planning, there are various tools but, CVP analysis is a powerful tool in the hand of management for profit planning. It helps to study relationship between cost, volume and profit. It also helps in improving profitability. Without CVP analysis, we can not make effective profit planning.The objectives behind this research study are examined the use of CVP analysis in profit planning of JCF Ltd. It is also examines the relationship between cost, volume and profit, margin of safety, BEP, leverage, operating profit of JCF Ltd. To fulfill objectives, I have used secondary data with descriptive analytical research design. I have analyzed various analytical tools to achieve objectives such as sales trend analysis, cost analysis, variable cost analysis, fixed cost analysis, v/c ratio analysis, cm ratio analysis, BEP analysis, Margin of safety analysis, Operating Profit analysis, Operating Leverage analysis etc.From analysis of data by various tools, it shows that JCF Ltd has decreasing Sales Trend, decrease in total cost and variable cost,fluctuating v/c ratio trend, contribution margin ratio is decreasing trend, break-even point is increasing trend, Financial BEP is increasing trend, operating profit is decreasing trend and operating leverage is increasing trend. Due to decrease in sales,contribution margin ratio and operating profit, it depicts that profitability of JCF Ltd is not satisfactory. It means that there is lack of effective profit planning and not practicing CVP tools.