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The document discusses break-even analysis for a snack bar and cafe called Eat and Be Well. It provides the cost structure and calculates the break-even point in units and sales, the units required to earn a profit of 100,000 pesos per month, and the margin of safety in units, pesos, and as a percentage if expected monthly sales are 3,000 units.

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Aleia Coleen ORENSE
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35 views

Assignment (2) - 1

The document discusses break-even analysis for a snack bar and cafe called Eat and Be Well. It provides the cost structure and calculates the break-even point in units and sales, the units required to earn a profit of 100,000 pesos per month, and the margin of safety in units, pesos, and as a percentage if expected monthly sales are 3,000 units.

Uploaded by

Aleia Coleen ORENSE
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Eat and Be Well is a snack bar and café designed to appeal to college students of De LaSalle Lipa and

others who love the idea of eating vegan burgers almost any time of the day.

Assume the following cost structure for EABW:

Unit Sales Price P100.00


Unit Variable Cost 20.00
Unit Contribution Margin 80.00
Monthly fixed costs P60,000

Required:
1.) How many customers must EABW serve each month to break even? (2 pts.)
2.) How much total sales revenue must EABW earn each month to break even? (2 pts.)
3.) If the owners want to earn an operating profit of P100,000 per month, how many customers must they
serve? (2 pts)
4.) If EABW expects to serve 3,000 customers next month, what is the margin of safety in units? In total sales
pesos? As a percentage of expected sales? (4 pts.)

Answer:

Break-Even Analysis
Total Contribution Margin
Per Unit
Sales Php 75,000 (c) Php 100
Less: Variable Costs 15,000 (b) 20
Contribution Margin 60,000 (a) 80
Less: Fixed Costs 60,000
Net Income 0

(a) Sales (75,000)


750 x 100 = P75,000
Break-Even = Net Income = 0 Fixed
Costs = Contribution Margin
(b) Variable Cost (15,000)
60,000/80 = 750
750 x 20 = P15,000

(c) Contribution Margin (60,000)


75,000 – 15,000 = 60,000

1.) EABW must serve 750 customers each month to break-even.

2.) Php 75,000 must be EABW’s total sales revenue each month to break-even.

3.) Operating profit is a company's profit after all expenses are taken out except for the cost of
debt, taxes, and certain one-off items.
Total Contribution Margin
Per Unit
Sales Php 200,000 Php 100
Less: Variable Costs 40,000 20
Contribution Margin 160,000 80
Less: Fixed Costs 60,000
Operating Profit 100,000

(a) Variable Cost (40,000)


160,000/80 = 2,000
2,000 x 20 = 40,000

(b) Sales (200,000)


2,000 x 100 = 200,000

If the owners want to earn an operating profit of P100,000 per month, they must serve
2,000 customers.
4.)
Total Contribution Margin
per Unit
Sales Php 300,000 (a) Php 100
Less: Variable Costs 60,000 (b) 20
Contribution Margin 240,000 (c) 80
Less: Fixed Costs 60,000
Net Income 180,000
(a) Sales (300,000)
P100 x 3,000 customers = P300,000

(b) Variable cost (60,000)


P20 x 3,000 = P60,000

(c) Contribution Margin (240,000)


P80 x 3,000 = P240,000

Margin of safety in units


= Current Sales Units – Break-even Point Units
= 3,000 – 750
= 2,250 units

Margin of safety in total sales pesos


= Current Sales – Break-even Sales
= P300,000 – P75,000
= P225,000

Margin of safety as a percentage of expected sales


= [(Current Sales Level - Break-even Point) / Current Sales Level] x 100
= [(300,000 – 75,000) / 300,000] x 100
= (225,000 / 300,000) x 100
= 0.75 x 100
= 75%

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