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(e) Target volume in units if the company is to make an operating profit of 25000000 for the year
66000
(f) Target volume in units if the company is to make 16250000 for the year, net of tax. (Tax Rate = 35%
pi 25000000
66000
Exercise 2
Contribution Margin 15000
Fixed Cost 12000000
Sales Profit Margin 10%
(b) What is the price per unit of the computers at the level of sales in (a)?
71,052.63
Exercise 3
Using the data from Exercise 1
(a) The impact on operating profit if sales price decreased by 10%
Sales Price 750
New Sales Price (-10%) 675
Total Fixed Costs 8000000
Total Variable Costs 15000000
Volume (units) 60000
Operating Profit 17,500,000.00
(b) The impact on operating profit if variable cost per unit decreases by 10%
Variable Cost 250
New Variable Cost (-10%) 225
Total Fixed Costs 8000000
Total Sales Revenue 45000000
Volume (units) 60000
Operating Profit 23,500,000.00
(c) The impact on operating profit if fixed costs were 10% lower while variable costs per unit were 20%
Variable Cost 250
New Variable Cost (+20%) 300
Fixed Cost 8000000
New Fixed Cost 7200000
Total Sales Revenue 45000000
Volume (units) 60000
Operating Profit 19,800,000.00
(d) Suppose that the company can only produce 50000 units (instead of 60000) but still wants to achi
Increase the selling price or lower the variable costs or fixed costs. =selling price has the
Exercise 5
A B
Selling Price per unit 12 15
Variable costs per unit 2.5 5
Contribution Margin 9.5 10
Total Fixed Cost 1500000
Volume (units) 300000 100000
(a) What is the expected level of operating profits for the expected sales volumes?
Operating Profit 2,350,000.00
(b) What is the break-even point if only A are sold? If only product B are sold?
If product A only 157894.7368421
If product B only 150000
(c) Assuming the same product mix at the break-even point, compute the break-even point for each p
pi = (P-V)A + (P-V)B - F
A=3B
9.5A+10B=1500000 B 38961.04
A 116883.1
ut still wants to achieve the same level of operating profit (22000000). How can this be achieved?
=selling price has the greatest effect in the operating profit (change in sales)
even point for each product
e achieved?
Company A
Sales 1500 300 450,000.00
Less: Var Cost 1500 120 180,000.00 CMR CM
Contribution Margin 270,000.00 0.6 180
Less: Fix Cost 250,000.00
Operating Inc 20,000.00
Company A - Higher Fixed Costs - higher operating leverage -> good for higher sales level
Cost structure depends on expected sales levels
CM/Unit 10
Fixed Cost 1000
Target Operating Income = just add target income in the Fixed Costs in the denominator
Contribution M
Contribution M
Contribution M
BE (units) BE (pesos) BE Point (units
1250 375,000.00 BE point (pesos
2000 4000
10 10
40% 40%
200 200
5000 5000
CMR CM
0.6 180
CMR CM
0.2666666667 80