Sales

Variable cost
Contribution Margin
Fixed Expenses
Operating Profit

Contribution margin ratio

Break-even: sales in Dollars
4,500,000
1,800,000
2,700,000
1,200,000
1,500,000

60%
2,000,000
No. of Units 18000
Sales W 2.5 45000
Variable cost 1.675 30150
Contribution Margin 0.825 14850
Fixed Expenses 4290
Operating Profit 10560

Contribution margin ratio 0.33

Break-even: sales in Dollars 13000
CM ratio/unit 0.825
Break-even: sales in units 5200

Sales to produce profit of 8250 38000

38000 W
25460 12540=X -(1.675X/2.5)
12540 Where X represent sales
4290 Contribution Margin 12540
8250 Sales factor 0.33
Sales 38000
 sale
1

profit = sale - variable cost - fixed cost

1 sales = fixed cost + variable cost + profit
2 fixed cost = sale - variable cost - profit
3 variable cost = sale - fixed cost - profit
4 contirbution = sale - variable cost
fixed cost variable cost profit
2 3 4

sales 10000
variabel cost 6000
margin of safety ratio 50%

a contribution 4000
b contribution ratio 40
c profit 2000
d fixed cost 2000
e bev 5000
f ms 5000
1)
Selling Prce/ Unit 50
Less: Variable Cost 30
Contribution Margin/ Unit 20

Fixed Cost 100000

Break-even: sales in units 5000

2) Break-even: sales in Dollars 250000

(3), (4)
No. of Units 7,500
Sales W1 50 375,000
Variable cost 225,000
Contribution Margin 150,000
Fixed Expenses 100,000
Operatng Proft 50,000

Volume in Units at 50,000 profit 7,500

Sales in Rupees at 50,000 profit 375,000

5) No. of Units 10,500

Sales W2 50 525,000
Variable cost 315,000
Contribution Margin 210,000
Fixed Expenses 160,000
Operatng Proft 50,000

Volume in Units at 50,000 profit 10,500

Sales in Rupees at 50,000 profit 525,000

6) No. of Units 11,500

Sales W3 50 575,000
Variable cost 345,000
Contribution Margin 230,000
Fixed Expenses 160,000
Operatng Proft 70,000
 Volume in Units at 70,000 profit 11,500

7)
Selling Prce/ Unit 45
Less: Variable Cost 30
Contribution Margin/ Unit 15

Fixed Cost 100000

Break-even: sales in units 6666.67

8)
Selling Prce/ Unit 45
Less: Variable Cost 25
Contribution Margin/ Unit 20

Fixed Cost 100000

Break-even: sales in units 5000

9)
Selling Prce/ Unit 60
Less: Variable Cost 36
Fixed Cost 120000

No. of Units 7,917

Sales W4 60 475,000
Variable cost 285,000
Contribution Margin 190,000
Fixed Expenses 120,000
Operatng Proft 70,000

Volume in Units at 70,000 profit 7,917

W1

CM= Sales- Variable Cost

150,000=X -(30X/50)
Where X represent sales
Contribution Margin 150,000
Sales factor 0.4
Sales 375000

W2

CM= Sales- Variable Cost

210,000=X -(30X/50)
Where X represent sales
Contribution Margin 210,000
Sales factor 0.4
Sales 525000

W3

CM= Sales- Variable Cost

230,000=X -(30X/50)
Where X represent sales
Contribution Margin 230,000
Sales factor 0.4
Sales 575,000
W4

CM= Sales- Variable Cost

190,000=X -(36X/60)
Where X represent sales
Contribution Margin 190,000
Sales factor 0.4
Sales 475,000
Selling Prce/ Unit
Less: Variable Cost
Contribution Margin/ Unit

Fixed Cost W1
Break-even: sales in units

Break-even: sales in Dollars

No. of Units W2
Sales
Less: Variable Cost
Contribution Margin
Less: Fixed Cost
Operating Profit/(loss)

Total Profit for 2003

Total Profit for 2004

No. of Units (Sales/Price per unit)

Sales (Total salesxpercentage)
Less: Variable Cost
Contribution Margin
Less: Fixed Cost Balancing Figure
Operating Profit/(loss) (Profit 0f 2003x1.5)

Fixed Cost
Coca Cola Fanta Tarimo Total
1.5 1.2 1 3.7
1.4 1 0.4 2.8
0.1 0.2 0.6 0.9

19000 15200 3800

190000 76000 6333

285000 91200 6333

187970 150376 37594

281955 180451 37594
263158 150376 15038
18797 30075 22556
19000 15200 3800
-203 14875 18756

33429
50143

100000 208333 100000

150000 250000 100000
140000 208333 40000
10000 41667 60000
10305 19354 31865
-305 22313 28135

10305 19354 31865

W1

Fixed Cost=x+4x+5x,
where x is Tarimo units sold
Total Fixed Cost 38000
Tarimo Fixed Cost 3800
Fanta Fixed Cost 15200
Coca Cola Fixed Cost 19000

W2
Sales Revenue=1(1x)+(1.2*4x)+(1.5*5x),
where x is Unit Sales of Tarimo
Sales Revenue 500000
Product Factor 13.3
Tarimo unt Sales 37594
Fanta unit Sales (4xTarimo) 150376
Coca Cola unit Sales(Tarimo+Fanta) 187970
No of Units
Sale Price/Unit
Sales
Variable cost
Contribution Margin
Fixed Expenses
Operatng Proft

Sales price/unit

Selling Prce/ Unit

Less: Variable Cost
Contribution Margin/ Unit
Fixed Cost

Break-even: sales in units

Break-even: sales in Dollars

Margin of safety
 50,000
(Sales/No of Unts) 100
Variable+C.M 5,000,000
84 4,200,000
Fixed+O.profit 800,000
540,000
260,000

100

100
84
16
540,000

33,750
3,375,000

(Sales-Break-even Sales) 1,625,000

Original Budget
Sale price/Unit
No of Unit
Variable Producton Cost to Sales
Variable Marketng Cost to Sales

Revised Budget
No of Unit
Sale price/Unit

Budgeted Profit
Sales
Less: Variable Cost

Contribution Margin
LessFixed Cost

Total Budgeted Profit

New Break-even:Sales in Dollars

b) C/M Rato
Contributon Margin
Sales
 2
80000
24%
6%

68000
2.1

Budgeted Profit
142,800

Variable Producton Cost to Sales 33,915

Variable Marketng Cost to Sales 8,925
-42,840
99,960

Fixed Production Cost 40,000

Fixed Marketing Cost 52,400
-92,400
7,560

99,960

44%
116,600
265,000
a)
C/M Ratio
B/E Sales
Fixed Cost

Sales (CM/CM ratio)*100

Variable cost (Sales-C/M)
Contribution Margin
Fixed Expenses
Operating Profit

Margin of Safety Ratio

b)
Profit
Add:Fixed Expense
Contribution Margin

Sales

C/M Ratio
 64%
160000
102400

250,000
90,000
160,000
102,400
57,600

36%

120,000
80000
200,000

400,000

50%
1)
Sales Price/unit
Less: Variable cost/Unit
CM/Unit

Fixed Cost
Break-even: sales in units(Passengers)
Break-even: sales in Dollars

2)
Operatng Profit
Add:Fixed Cost
Contribution Margin

No. of Passengers/flight to earn 70,000 Profit

 660
60
600

4130000
6883
4543000

70000
4130000
4200000
W
W 70
CM= Sales- Variable Cost
240,000=(100*660*X) -(100*60*X)
Where X represent Passengers

Contribution Margin
Sales factor
No of Passenger
ales- Variable Cost
00*660*X) -(100*60*X)
represent Passengers

4,200,000
60000
70
Current Structure
Sales
Variable cost
Contribution Margin
Fixed Expenses
Operatng Profit

Break-even: sales in units

Break-even: sales in Dollars

Proposed Structure
Sales
Variable cost
Contribution Margin
Less: Advertsement Caution Available
Less: Fixed Expenses
Operatng Profit

Advertsement Caution Available

Sales Price/unit
Less: Variable cost/Unit
CM/Unit

Fixed Cost
Break-even: sales in units(Passengers)
Break-even: sales in Dollars
 250,000
150,000
100,000
100,000
-

50000
250,000

300,000
150,000
150,000
(CM-OP-FC) 20,000
100,000
30,000

20,000

6
3
3

120,000
40,000
240,000
 Option 1: Break-even Sales

Current Structure
Units
Sale price/Unit
Sales
Variable Cost/unit
Variable Cost

Variable cost ratio

C/M ratio
Fixed Cost
Break-even: sales in Dollars

Total Sales Revenue

Less: Variable Cost
Contribution margin
Less: Fixed Expense
Profit

Proposal 1

Units
Sale price/Unit
Sales
Variable Cost/unit
Variable Cost

Total Sales Revenue

Less: Variable Cost
Contribution margin
Less: Fixed Expense
Profit

Proposal 2
 Units
Sale price/Unit
Sales
Variable Cost/unit
Variable Cost

Total Sales Revenue

Less: Variable Cost
Contribution margin
Less: Fixed Expense
Profit

Suggetion: Management of Z Ltd should opt Proposal 1 as it is providing

It means 590,000 units of product A should b
Option 1: Break-even Sales revenue is requred in total

Product A Product B Product C Total

460,000 1,000,000 380,000
3 2.45 4
1,380,000 2,450,000 1,520,000 5,350,000
1.20 1.67 2.60
552,000 1,670,000 988,000 3,210,000

60%
40%
1,710,000
4,275,000

5,350,000
3,210,000
2,140,000
1,710,000
430,000

Product A Product B Product C Total

590,000 1,000,000 380,000
2.75 2.45 4
1,622,500 2,450,000 1,520,000 5,592,500
1.20 1.67 2.60
708,000 1,670,000 988,000 3,366,000

5,592,500
3,366,000
2,226,500
1,770,000
456,500
 Product A Product B Product C Total
650,000 1,000,000 380,000
2.55 2.45 4
1,657,500 2,450,000 1,520,000 5,627,500
1.20 1.67 2.60
780,000 1,670,000 988,000 3,438,000

5,627,500
3,438,000
2,189,500
1,770,000
419,500

opt Proposal 1 as it is providing more profit than the Current structure and Proposal 2.
0,000 units of product A should be produced at Rs. 2.75/unit
 Option 2: Break-even Sales revenue is required Product wise

Current Structure Product A Product B

Units 460,000 1,000,000
Sale price/Unit 3 2.45
Sales 1,380,000 2,450,000
Variable Cost/unit 1.20 1.67
Variable Cost 552,000 1,670,000
Fixed Cost(based on Sales % in total Sales) 441,084 783,084

CM/Unit 1.80 0.78

Break-even: sales in units 245,047 1,003,954
Break-even: sales in Dollars 735,140 2,459,687
wise

Product C Total
380,000
4
1,520,000 5,350,000
2.60
988,000 3,210,000
485,832 1,710,000

1.40
347,023
1,388,091
 unist sold 5000

sales 45000 2
vbl 18000
fx 12000
1 cm 27000
2 cm.ratio 60% 3
3 bep 20000
proof
sales 20000
vc 8000 4
cm 12000
fx 12000
prfit 0
sales 2.5
1 bep.Rs. 13000 5
cm 0.825
cm.ratio 0.33
2 bep 5200
3 desire profit 38000
units 15200
selling price 50
vbl.unit 30
fx.period 100000
cm 20
cm.ratio 0.4
1 bep 5000
2 bep.Rs. 250000
3 units 7500
4 sales 375000
5 units 10500
6 units 11500
selling price 45
vbl.unit 30
cm 15
 cm.ratio 3
7 bep 6667
8 45
25
20
2.25
bep 5000

selling price 60
vbl.unit 36
fx.period 120000
cm 24
cm.ratio 2.5
bep 48000
target sales 6667
400000

current structure

sales 250000
variable cost
absorption costing v.mfg+f.foh cost 10
opeing inventory 0
production 25000
sold 22000
closing invnetory 3000
ending invtory value 30000
marginal costing
variable mfg 8
closing invnetory 3000
ending invtory value 24000
total variable cost by direct costing
units sold x variable cost 176000
variable selling 66000
total cogs 242000
total fixed expense absorption costing
fixed foh 2
units sold 22000
44000
fixed admin 30000
fixed cost would be treated at period cost 50000
30000

coca cola
sales 1.5
vc 1.4
cm 0.1
fx.cost 19000
1 bep 190000
cm.ratio 0.067
2 bep.Rs. 570000

units 187970
sales 281955
vc 263158
cm 18797
less:fx cost 19000
profit -203

units 100000
sales 150000
vc 140000
cm 10000
less:fixed cost 10305
-305

5000

units sold fixed cost

540,000.00
breakeven in units fixed cost/cm.ratio
in dollors 3375000
ms sales-bep
units

units
sales revenue
selling price pe
fixed cost
variable cost
vc.per unit
profit
cm
cm per unit
cm ratio
absorption income statement marginal income statement
revenue 640000 revenue
cogs 360000 vbl.mfg
gross margin 280000 vbl.sa
variable cost 96000 cm
fixed cost 60000 fx.fmg
profit 124000 fx.sa
profit

absorption income statement marginal income statement

revenue 440000 revenue
cogs 280000 vbl.mfg
gross margin 160000 vbl.sa
vbl.m+a 20000 cm
fx.m+a 70000 fx.fmg
profit 70000 fx.sa
profit
fanta trimo
1.2 1 fx.cost
1 0.4
0.2 0.6 500000
15200 3800 13.3
76000 6333 187970
0.17 0.60 150376
91200 6333 37594

150376 37594
180451 37594
150376 15038
30075 22556
15200 3800
14875 18756 33429 50143

208333 100000
 250000 100000
208333 40000
41667 60000
19354 31865
22313 28135

variable cots profit sale per unit pric

4,200,000.00 260,000.00 5,000,000.00 100.00
ed cost/cm.ratio
33750
1,625,000.00

revised budget
80000 new units 68000 fixed cost
160000 new revenue 142800
2 new selling price 2.10 profit
92400 fx.cost 92400 57600
48000 vc 40800
0.6 vc.per unit 0.6
19600 profit 9600
112000 cm 102000
1.4 cm per unit 1.50
1.43 cm ratio 0.71
bep in dollors 129360
sales figure 265000

160000 break-even sales

57600 profit
102400 fixed cost
0.64 cm ratio
250000 sale
90000 vc
36% margin of safety
sales 400000
profit 120000
fx.expense 80000
vc 200000
cm 200000
cm.ratio 0.5
marginal income statement
640000
320000
96000
224000
40000
60000
124000

marginal income statement

440000
200000 dm 2.5
96000 dl 2.5
144000 voh 5
20000 foh 4
70000 t.vbl.mfg 14
54000

38000
cm cm.ratio
800,000.00
16

sale=-vc-profit

sale vc fx.cost

total fixed cost/cm ratio

sale-fixed cots-variable cost 57600
sale-variable cost-profit 102400
cm per unit/selling price per unit 0.64
fx+vc+profit 250000
sale-fx-profit 102400
sale price 660
flights per month 100 vc 60
passenger per flight 150 cm 600
airline fair per passenger 660 fx.cost 4130000
cost per flight 40000 break-even 6883
variable cost per passenger 60 bep.rs 4543000
fixed cost per month 130000
7000 70