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# MAY 2011

Lisa company is the exclusive distributor for an automobile product.
The product sells for tk. 40 per unit and has CM ratio 30%. The
company's fixed expenses are Tk. 180000.00 per year.
Required:
i) What is the variable expenses per unit?
ii) Using the equation method :
a) What is the break-even point in units and sales taka?
b) What sales level in units and in sales taka is required to earn an
annual profit of taka 60,000.00?
c) Assume that by using a more efficient shipper, the company is
able to reduce its variable expenses by Tk. 4 per unit . What is the
company's new break-even point in units and sales Taka?
iii) Repeat (ii) using the unit contribution method

We know
CM ratio = Contribution /sales
CM ratio = (selling price - VC per unit)/ selling Price
0.30
= (40-VC)/40
12
= 40-VC
VC
= 40 - 12
28 Per unit

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1) BEP in Units and Taka
We have
P = 40, V = 28 and FC = 180000.00
40x = 28x + 180000.00
40x - 28x = 180000.00
12x
= 180000.00
x
= 15000.00 Units
So, Break even in unit = 15000 units
Break-even point in sales taka = 40X1500 = 6,00,000.00 taka
2) Targeted sales in unit and taka
If targeted Profit Tk. 60000.00
We have
40x = 28x + 180000+ 60000.00
40x-28x =240000.00
12x
= 240000.00
x
= 20000.00 units
So, Break-even in unit =20000.00 units
Break-even point in sales = 40X 20000.00
= 8,00,000.00 Taka

2

BEP in Units and Taka (If VC changes)
If VC reduces by Tk. 4
We have
P = 40 V = 28 - 4 = 24 and FC = 180000.00
40x
= 24x + 180000.00
40x-24x = 180000.00
16x
= 180000.00
x
= 11250.00 units
So, Break even in Units
= 11250 units
Break-even point in sales taka = 40 X 11250
= 450000.00 Tk
1) BEP in Units and taka
BEP Units
= Fixed costs/Contribution Margin per Unit
= Fixed costs/(Selling Price-VC per Unit)
= (180000 - (40 -28)
= 180000/12
= 15000 Units
BEP in Taka
= Fixed Costs/CM Ratio
=180000/0.30
= 600,000.00 Taka

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2) Targeted Sales in Units and Taka
Targeted sales in units
=( Fixed cost + Targeted Profit)/contribution Margin per unit
=(fixed cost + Targeted profit)/Selling Price - VC per Unit)
= (180000.00 + 60000.00)/(40-28)
=240000/12
=20000.00 Units
Tageted sales in Taka
= (fixed Cost + Targeted profit)/CM Ratio
=(180000+ 60000)/0.30
= 8,00,000.00 Taka
3) BEP in Units and Taka (if VC charge)
= BEP in units
= Fixed cost/Contribution Margin per unit
= Fixed costs/(Selling price- VC per unit)
= 180000/{40- (28-4)}
=180000/16
= 11250.00 Units
New CM ratio
=(Selling Price - VC per Unit)/Selling Price
=(40-24)/40
= 0.40
=40%
BEP in Taka
= Fixed Costs/CM Ratio
= 180000.00/0.40 = 4,50,000.00 Taka

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variable Cost are direct labor and materials cost. It is a simple tool defining the lowest quantity of sales which will include both variable and fixed costs. reflecting a loss on the product. 2. rent etc. 5 . Cost can be reasonably subdivided in to fixed and variable components  Fixed costs and variable cost can be easily identified in most cases.NOVEMBER 2011 1. It is also helpful in recognizing the relevance of fixed and variable cost. All cost volume Profit relationships are linear. DISCUSS THE USEFULNESS AND ASSUMPTIONS OF BREAK-EVEN ANALYSIS ? Answer : The break even point is helpful in making decisions in business. Assumption of Break-even analysis 1.  Semi variable expenses can be problematic. Moreover such analysis facilitates the managers with a quantity which can be used to evaluate the future demand. the manager can use this information for taking various decisions. but can nonetheless be separated into fixed and variable components for analysis purpose. salaries. The fixed cost is less with a more flexible personnel and equipment thereby resulting in a lower break-even point. If. in case the break even point lies above the estimated demand. Fixed costs are depreciation.

000.00 19.000.00 Annual Fixed Expenses are Rent Salaries Advertising Other fixed expenses Total 60000.60. relationship may be different.00 is to be incurred in fixed salaries.000 pairs of choppals are sold.00 80.  Assumption holds so long as analysis is confined to reasonable range of prices.50) per pair a further commission. What would be the Break-even point in units? 6 .  2.Assumption holds so long as analysis is confined to reasonable range of operations. The Paradise Shoe Company sells five different styles of ladies choppers with identical costs and selling prices.50 1. Sales prices will not change with changes in volume.00 3. but instead a fixed amount of taka 90.00. The selling price is also proposed to be increased by 5%.000.000.00 Required : i) Calculate the annual Break even point in units and in value. 3.  Economic theory states that one would normally expect price increase to be accompanied by decrease in sales volume and vice versa.000.00 2. ii) The sales commission are proposed to be discounted. The company is trying to find out the profitability of opening another store which has the following expenses and revenues: Per pair Selling Price Variable cost Salesman commission Total Variable cost taka 30. What will be the Break-even point in units? iii) It is proposed to pay the store manager 50 paisa (tk 0.50 21.  If levels of operations are doubled. Also determine the profit or loss if 35. A reduction in selling price of 5% is also proposed.00 20.

what would be the store's net profit. If the store manager were to be paid 30 paisa (tk 0. if 50.00 = 9.iv) Refer to the original data.60.000.00.000 pairs were sold ? SOLUTION Requirement (i) Contribution per unit = Selling Price .360000.60.Fixed cost = 35000 X 30 X 30% .Variable cost = 30.00 .000. Profit or loss for 35000 pairs sold sales X CM ratio .360000 = -45000.30 = 12.00 tk CM Ratio = Contribution X 100 Sales = (9 X 100)/30 = 30% Break-even point (BEP) in unit = Fixed expense/ Contribution Margin = 3.30) commission on each pair of choppal sold in excess of Break-even point.00 tk (loss) 7 .00 = 315000 .000/0.000.00 pairs Break-even point (in value) = Fixed expense/ CM ratio = 3.21.00/9 = 40.00 taka.

50 = 9.19.50 Tk Contribution Margin New Break-even Point = Selling Price .Variable Cost = 28.00 + 0.000.50 = 10.50 .Requirement (ii) Reduction of selling Price 5% = 30 30x5% = 28.00 = Fixed expense / Contribution Margin = 360000/10 = 36000.21.00 units (pairs) 8 .Variable cost = 31.50 Tk New variable cost = 21.50 .50 = 21.00 Units(pairs) Requirement (iii) Selling price 5% increase = 30 + 30x5 = 31.50 tk Sales commission = 0 Total Fixed expense = 360000 + 90000 = 450000.00 Contribution Margin New Break-even point Margin = Selling Price .00 Tk = New fixed expense / contribution = 450000/9 = 50.

00 tk Or Profit = 50000 X 9 .000 .000-360000 = 87000.(50000 X 21 + 3000) 360000. Profit = Selling Price .00 = 15.00 Taka.53.10.000-40000) units .3000. So total excess commission to be given is equal to 10000 X 0.00.00 9 .360000 = 87000.30 = 3000.Requirement (iv) Commission to be given to store manager for 10000 (50.(variable cost + 3000) Fixed expenses = 50000 X 30 .

The company's fixed expenses are Tk.30 = (40-VC)/40 12 = 40-VC VC = 40 . 4 per unit . 180000.00 per year. What is the company's new break-even point in units and sales Taka? iii) Repeat (ii) using the unit contribution method Answer i) We know CM ratio = Contribution /sales CM ratio = (selling price .12 28 Per unit 10 . The product sells for tk.000.VC per unit)/ selling Price 0. Required: i) What is the variable expenses per unit? ii) Using the equation method : a) What is the break-even point in units and sales taka? b) What sales level in units and in sales taka is required to earn an annual profit of taka 60.MAY 2012 CVP ANALYSIS Mita company is the exclusive distributor for an automobile product.00? c) Assume that by using a more efficient shipper. 40 per unit and has CM ratio 30%. the company is able to reduce its variable expenses by Tk.

00. 4 We have P = 40 V = 28 .00 11 .00 units So.00 Units So.00 12x = 180000.00 taka 2) Targeted sales in unit and taka If targeted Profit Tk.00 40x = 24x + 180000.00 We have 40x = 28x + 180000+ 60000.00 40x-28x =240000.00 Taka BEP in Units and Taka (If VC changes) If VC reduces by Tk. Break-even in unit =20000. Break even in unit = 15000 units Break-even point in sales taka = 40X1500 = 6.00 x = 15000. V = 28 and FC = 180000.00 units Break-even point in sales = 40X 20000.28x = 180000.00 12x = 240000.Answer (ii) Equation Method 1) BEP in Units and Taka We have P = 40.00 = 8.00 40x = 28x + 180000.4 = 24 and FC = 180000.00 x = 20000. 60000.00 40x .000.000.00.

00 units So.00 x = 11250.00 Taka 2) Targeted Sales in Units and Taka Targeted sales in units =( Fixed cost + Targeted Profit)/contribution Margin per unit =(fixed cost + Targeted profit)/Selling Price .40x-24x = 180000.000.00 Tk Answer (iii) Unit contribution Method 1) BEP in Units and taka BEP Units = Fixed costs/Contribution Margin per Unit = Fixed costs/(Selling Price-VC per Unit) = (180000 .00 + 60000.(40 -28) = 180000/12 = 15000 Units BEP in Taka = Fixed Costs/CM Ratio =180000/0.00)/(40-28) =240000/12 =20000.30 = 600.00 Units 12 . Break even in Units Break-even point in sales taka = 40 X 11250 = 11250 units = 450000.VC per Unit) = (180000.00 16x = 180000.

000.00 Taka 13 .00/0.000.00 Units New CM ratio =(Selling Price .40 =40% BEP in Taka = Fixed Costs/CM Ratio = 180000.50.40 = 4.Tageted sales in Taka = (fixed Cost + Targeted profit)/CM Ratio =(180000+ 60000)/0.VC per Unit)/Selling Price =(40-24)/40 = 0.30 = 8.VC per unit) = 180000/{40.(28-4)} =180000/16 = 11250.00.00 Taka 3) BEP in Units and Taka (if VC charge) = BEP in units = Fixed cost/Contribution Margin per unit = Fixed costs/(Selling price.

000. Required: i) What is the variable expenses per unit? ii) Using the equation method : a) What is the break-even point in units and sales taka? b) What sales level in units and in sales taka is required to earn an annual profit of taka 60. 40 per unit and has CM ratio 30%. The product sells for tk. 180000. The company's fixed expenses are Tk. 4 per unit .12 = 28 Per unit 14 . the company is able to reduce its variable expenses by Tk.JUNE 2013 CVP ANALYSIS Eva company is the exclusive distributor for an automobile product.00 per year.30 = (40-VC)/40 12 = 40-VC VC = 40 . What is the company's new break-even point in units and sales Taka? iii) Repeat (ii) using the unit contribution method Answer i) We know CM ratio = Contribution /sales CM ratio = (selling price .VC per unit)/ selling Price 0.00? c) Assume that by using a more efficient shipper.

00)/(40-28) =240000/12 =20000.Answer (iii) Unit contribution Method 1) BEP in Units and taka BEP Units = Fixed costs/Contribution Margin per Unit = Fixed costs/(Selling Price-VC per Unit) = (180000 .00.30 = 8.00 Units Tageted sales in Taka = (fixed Cost + Targeted profit)/CM Ratio =(180000+ 60000)/0.30 = 600.000.000.VC per unit) 15 .VC per Unit) = (180000.00 Taka 3) BEP in Units and Taka (if VC charge) = BEP in units = Fixed cost/Contribution Margin per unit = Fixed costs/(Selling price.00 Taka 2) Targeted Sales in Units and Taka Targeted sales in units =( Fixed cost + Targeted Profit)/contribution Margin per unit =(fixed cost + Targeted profit)/Selling Price .00 + 60000.(40 -28) = 180000/12 = 15000 Units BEP in Taka = Fixed Costs/CM Ratio =180000/0.

00 Units New CM ratio =(Selling Price .40 = 4.00/0.000.00 Taka 16 .= 180000/{40.50.40 =40% BEP in Taka = Fixed Costs/CM Ratio = 180000.VC per Unit)/Selling Price =(40-24)/40 = 0.(28-4)} =180000/16 = 11250.

500. 22. In the most recent year company sold 5000 units of its product @Tk. The company's fixed expenses are Tk.DECEMBER 2013 CVP ANALYSIS Feather Friends Inc.500 and net income of Tk. Required: i) What is the variable expenses per unit? ii) Using the equation method : a) What is the break-even point in units and sales taka? b) What sales level in units and in sales taka is required to earn an annual profit of taka 60. The product sells for tk. the company is able to reduce its variable expenses by Tk.00 per year.12. 1. 50 per unit. 180000. At this level of sales they generated contribution margin of tk. Management is anxious to improve the company’s profit performance and has asked for several items of information Requirement i) JUNE 2013 CVP ANALYSIS Eva company is the exclusive distributor for an automobile product. 4 per unit .000. What is the company's new break-even point in units and sales Taka? iii) Repeat (ii) using the unit contribution method 17 . 40 per unit and has CM ratio 30%. makes high quality wooden birdhouse.00? c) Assume that by using a more efficient shipper.

000.30 = (40-VC)/40 12 = 40-VC VC = 40 .(40 -28) = 180000/12 = 15000 Units BEP in Taka = Fixed Costs/CM Ratio =180000/0.VC per unit)/ selling Price 0.00 + 60000.30 = 600.00 Taka 2) Targeted Sales in Units and Taka Targeted sales in units =( Fixed cost + Targeted Profit)/contribution Margin per unit =(fixed cost + Targeted profit)/Selling Price .VC per Unit) = (180000.00)/(40-28) =240000/12 18 .Answer i) We know CM ratio = Contribution /sales CM ratio = (selling price .12 = 28 Per unit Answer (iii) Unit contribution Method 1) BEP in Units and taka BEP Units = Fixed costs/Contribution Margin per Unit = Fixed costs/(Selling Price-VC per Unit) = (180000 .

VC per unit) = 180000/{40.000.40 = 4.VC per Unit)/Selling Price =(40-24)/40 = 0.00 Units Tageted sales in Taka = (fixed Cost + Targeted profit)/CM Ratio =(180000+ 60000)/0.00 Taka 3) BEP in Units and Taka (if VC charge) = BEP in units = Fixed cost/Contribution Margin per unit = Fixed costs/(Selling price.000.00 Taka 19 .40 =40% BEP in Taka = Fixed Costs/CM Ratio = 180000.30 = 8.00/0.(28-4)} =180000/16 = 11250.=20000.00 Units New CM ratio =(Selling Price .00.50.

assume that next year management wants the company to earn a minimum profit of taka 31. 1. c) Verify your answer to vi) b) by preparing a new income 20 .500. makes high quality wooden birdhouse. If cost behavior patterns remain unchanged . At this level of sales they generated contribution margin of tk. compute the company’s margin of safty in both taka and percentage form. 40. b) Assume that through a more intense effort by the sales staff the company’s sales increase by 12% next year. Management is anxious to improve the company’s profit performance and has asked for several items of information Requirement i) Compute the company’s CM ratio and variable expense ratio ? ii) Compute the company’s Break-even point in both units and sales taka iii) Assume that the sales increase by Tk. 22. How many units will have to be sold to meet this target profit figure? v) Refer to the original data.DECEMBER 2013 CVP ANALYSIS Feather Friends Inc.000 next year. In the most recent year company sold 5000 units of its product @Tk. By what percentage would you expect net income to increase? Use oprating leverage concept to obtain your answer.500. 50 per unit. vi) A) Compute the company’s degree of operating leverage at the present level of sales. by how much will the company’s net income increase? iv) Refer to the original data.500 and net income of Tk.12.

50 90000 Tk 22500 Tk 21 .50 (137500 / 5000) 22. Answer : Contribution Margin = Selling Price – Variable Cost 112500 = 5000X50 – Variable Cost 250000 – 112500 = Variable Cost Variable cost = 137500 Net Profit = Sales – Fixed Cost – Variable cost 22500 = 250000 – Fixed cost – 137500 = 250000 – 137500 – Fixed Cost = 112500 – Fixed Cost 112500 – 22500 = Fixed cost Fixed cost = 90000 Taka Sales Variable cost Contribution Margin Fixed cost Net income In Unit Sales Variable cost Contribution Margin Fixed cost Net Income 250000 Tk 137500 Tk 112500 Tk 90000 Tk 22500 Tk Taka 50 27.statement showing a 12% increase in sales.

50 = 159500.00.(i) CM ratio = Contribution Margin x 100 Sales = 22.50 X 100 50 = 45% or 0.45 (ii) Break-even Point in Units = Fixed expense/contribution Margin = 90000/22.45 = 2.00 Taka Net Income = Sales – Variable cost – Fixed cost = 290000 – 159500 – 90000 = 40500 taka Net income increase = 40500 – 22500 = 18000 taka (iv) Target sales in units = Fixed expense + target profit Contribution Margin 22 .000 taka (iii) Sales increase by 40000 taka = 40000/50 = 800 Units increase New sales = 250000 + 40000 = 290000 taka Variable cost = 137500 + 800 X 27.50 = 4000 units Break-even Point in sales = Fixed expense/ CM ratio = 90000/0.

= (90000 + 31500)/22.50 = 5400 units (v) Margin of Safety Sales in taka – Break even sales in taka = 250000 – 200000 = 50000 taka Margin of Safety ratio = Margin of safety X 100 Sales = 50000 X 100 250000 = 20% (vi) (a) Degree of Operating Leverage = Sales – Variable cost Sales – Variable Cost – Fixed Cost = 250000 – 137500 250000 – 137500 – 90000 = 112500 22500 =5 23 .

00 taka Contribution Margin= 126000. so percentage of net income increase by 5 X 12% = 60% (c) Sales 250000 X 12% = 280000.22500 = 13500 X 100 22500 = 60% proved sales.00 taka Increase = 36000 . b) Assume that through a more intense effort by the sales staff the company’s sales increase by 12% next year.00 taka Net profit = 36000.b) sales increase by 12 % . 24 .00 Taka Variable cost X 12% = 154000. c) Verify your answer to vi) b) by preparing a new income statement showing a 12% increase in sales.00 taka cost Fixed 90000. By what percentage would you expect net income to increase? Use oprating leverage concept to obtain your answer.

Answer : Contribution Margin = Selling Price – Variable Cost 112500 = 5000X50 – Variable Cost 250000 – 112500 = Variable Cost Variable cost = 137500 Net Profit = Sales – Fixed Cost – Variable cost 22500 = 250000 – Fixed cost – 137500 = 250000 – 137500 – Fixed Cost = 112500 – Fixed Cost 112500 – 22500 = Fixed cost Fixed cost = 90000 Taka Sales Variable cost Contribution Margin Fixed cost Net income In Unit Sales Variable cost Contribution Margin Fixed cost Net Income (i) 250000 Tk 137500 Tk 112500 Tk 90000 Tk 22500 Tk Taka 50 27.50 90000 Tk 22500 Tk CM ratio = Contribution Margin x 25 .50 (137500 / 5000) 22.

50 = 4000 units Break-even Point in sales = Fixed expense/ CM ratio = 90000/0.45 = 2.50 = 5400 units 26 .00.50 X 100 50 = 45% or 0.00 Taka Net Income = Sales – Variable cost – Fixed cost = 290000 – 159500 – 90000 = 40500 taka Net income increase = 40500 – 22500 = 18000 taka (iv) Target sales in units = Fixed expense + target profit Contribution Margin = (90000 + 31500)/22.45 (ii) Break-even Point in Units = Fixed expense/contribution Margin = 90000/22.000 taka (iii) Sales increase by 40000 taka = 40000/50 = 800 Units increase New sales = 250000 + 40000 = 290000 taka Variable cost = 137500 + 800 X 27.100 Sales = 22.50 = 159500.

so percentage of net income increase by 5 X 12% = 60% (c) 27 .(v) Margin of Safety Sales in taka – Break even sales in taka = 250000 – 200000 = 50000 taka Margin of Safety ratio = Margin of safety X 100 Sales = 50000 X 100 250000 = 20% (vi) (a) Degree of Operating Leverage = Sales – Variable cost Sales – Variable Cost – Fixed Cost = 250000 – 137500 250000 – 137500 – 90000 = 112500 22500 =5 b) sales increase by 12 % .

00 taka cost Fixed 90000.00 taka Net profit = 36000.00 Taka Variable cost X 12% = 154000.00 taka Increase = 36000 .22500 = 13500 X 100 22500 = 60% proved 28 .Sales 250000 X 12% = 280000.00 taka Contribution Margin= 126000.

000: Average selling price Tk.00 per box Average variable costs Cost of candy Tk.40 per box Annual fixed costs Selling Administrative Tk.00 per box Selling Expenses Tk.000 29 .2.160. Small but steady growth in sales has been achived by the company over the past few years while candy price have been increasing .1.JUNE 2014 CVP ANALYSIS Hawaiian Candy Company is a wholesale distributor of candy.000 Tk.4.2.84.40 per box Total Tk. The company is manufacturing its plan for the coming fiscal year.280. Presented below are the data used to project income of Tk.0.

000 boxes) Tk. Required : (i) What is Hawaiian Candy Company’s break-even point in boxes of candy and in Taka amount for the current year? (ii) Calculate margin of safety and degree of operating leverage of the current year.560. The manufacturing of the candy have announced that they will increase prices of their products by 15 percent in the coming year.90.1. (iii) What selling price per box must the company charge to cover the 15% increase in the cost of candy and still maintain the current contribution margin ratio? 30 . what will be change in expected profit if expected sales are increased by 15%.Total Tk.440.000.000 Expected annual sales volume (3. The company expects that all other cost will remain the same rates or levels as the current year.

000 boxes Break Even Point in (Taka) = B/E X Selling Price per unit = (2.40 = 2.40 X 100 4 = 40% Margin of Safety = Sales – Break-even sales 31 .75.Here : Contribution per unit = Selling price per unit – Variable cost per unit (i) Break-even point (in units) Margin per unit = =Fixed cost/Contribution 440000 4 .2.00.000 X 4) Taka = 11.75.000 Taka (ii) C/M Ratio = Contributin X 100 Sales = 4 – 2.

So Profit will be changed to 3.00.40) 2.000 – 11.= 15.39 Sales increase by 15% .40 = Sales – ( 2.60.40 = Sales – (Cost of candy + Selling expense) 2.000 = 4.85% (iii) Contribution Margin = Sales – Variable cost 2.60.000 taka Degree of Operating Leverage = Sales – Variable Cost Net Profit = 15.30 + 0.40) 32 .40 = Sales – ( 2 + 2X15% + 0.60.39 X 15% = 50.000 – 936000 184000 = 3.

180000.30 = (40-VC)/40 33 .00 per year.70 = Sales So.000. the company is able to reduce its variable expenses by Tk.00? c) Assume that by using a more efficient shipper. 40 per unit and has CM ratio 30%. 4 per unit . The company's fixed expenses are Tk. What is the company's new break-even point in units and sales Taka? iii) Repeat (ii) using the unit contribution method Answer i) We know CM ratio = Contribution /sales CM ratio = (selling price .10 Taka per Unit DECEMBER 2014 CVP ANALYSIS Ishrak company is the exclusive distributor for an automobile product. Selling Price = 5. The product sells for tk.VC per unit)/ selling Price 0.40 + 2. Required: i) What is the variable expenses per unit? ii) Using the equation method : a) What is the break-even point in units and sales taka? b) What sales level in units and in sales taka is required to earn an annual profit of taka 60.2.

12 = 28 Per unit Answer (iii) Unit contribution Method 1) BEP in Units and taka BEP Units = Fixed costs/Contribution Margin per Unit = Fixed costs/(Selling Price-VC per Unit) = (180000 .00)/(40-28) =240000/12 =20000.30 34 .VC per Unit) = (180000.12 VC = 40-VC = 40 .00 Taka 2) Targeted Sales in Units and Taka Targeted sales in units =( Fixed cost + Targeted Profit)/contribution Margin per unit =(fixed cost + Targeted profit)/Selling Price .00 + 60000.00 Units Tageted sales in Taka = (fixed Cost + Targeted profit)/CM Ratio =(180000+ 60000)/0.(40 -28) = 180000/12 = 15000 Units BEP in Taka = Fixed Costs/CM Ratio =180000/0.000.30 = 600.

00 Taka 3) BEP in Units and Taka (if VC charge) = BEP in units = Fixed cost/Contribution Margin per unit = Fixed costs/(Selling price.VC per Unit)/Selling Price =(40-24)/40 = 0.(28-4)} =180000/16 = 11250.40 =40% BEP in Taka = Fixed Costs/CM Ratio = 180000.= 8.00.000.40 = 4.50.00 Taka 35 .00 Units New CM ratio =(Selling Price .00/0.VC per unit) = 180000/{40.000.

000 ? (v) What is the company’s margin of safety in taka ? (vi) What is the company’s degree of operating leverage ? Answer : (i) Contribution Margin Ratio = Contribution X 100 Sales 36 .000 Contribution Margin 4.25.00.000 The company has no beginning or ending inventories and produced and sold 20.000 Net operating income 1.JUNE 2015 CVP ANALYSIS The Following is the Raiyan corporation’s contribution format income statement for last month : Items taka Sales 12.00.000 Variable expenses 8. 1. Required : (i) What is the company’s contribution margin ratio ? (ii) What is the company’s Break-even units ? (iii) If sales increase by 100 units how much should net operating income increase ? (iv) How much units would the company have to sell to attain the target profits of Tk.000 units during the month.00.000 Fixed expense 3.00.00.

000 So.000 = 2.00.000 taka 37 .02.000 X 100 12.00.00. New sales will be as below 20.02.000 = 33.00. Break-even in units = Fixed expense Contribution Margin = 3.000 .00.000 Contribution Margin = 4.00.000 20 = 15.000 Net operating income 1.00.= 12.1.02.000 Net Operating Income = 1.33 % (ii) Break-even in units Contribution Margin in units will be as below Items taka per units Sales 60 Variable expenses 40 Contribution Margin 20 Fixed expense 3.000 + 100 = 20100 units and income statement is as below sales (20100 X 60) = 12.000 – 8.000 units (iii) If sales increase by 100 units.00.04.000 Net Income increase = 1.06.000 Variable Expanse (20100 X 40) = 8.000 Fixed Expense = 3.

00.000 .000 .9.000 = 3.Fixed expense = 12.000 .25.00.000 20 = 4.Variable Cost Sales .00.25.8.(iv) Target sales in units = Fixed expense + Target profit Contribution Margin = 3.00.00.Break-even sales = 12.00.000 1.00.00.000 =4 38 .00.000 X 60) = 12.000 1.00.000 taka (vi) Degree of Operating Leverage = DOL Sales .(15.000 + 1.000 = 4.variable cost .000 20 = 21150 units (v) Margin of Safety in taka = Sales .

The company's present selling price is tk. 2 reduction in the selling price.50. Fixed expenses are 540000 per year.000 39 . what is the maximum profit that the company can earn yearly. Present Operating Income Items taka Sales (15000 X 70) 10. What is the present yearly net operating income or loss ? 2. Marketing studies suggest that the company can increase sales by 5000 units for each tk. Required 1.000 Contribution Margin 4.000 units. At how many units and what selling price per units would the company generate this profit? 4.DECEMBER 2015 CVP ANALYSIS Minden company introduced a new product last year for which it is trying to find an optimal selling price.000 Fixed expense 5. Assumes that the marketing studies are correct. The present annual sales volume (at the taka 70 selling price) is 15.40. What is the present break-even point in units and in taka sales? 3.g the selling price at the level of the maximum profits) ? Why is the break even point different from the break-even point you computed in (2) above ? Answer 1.000 Variable expenses (15000 X 40) 6. What would be the break-even point in units and in sales taka using the selling price you determine in (3) above(e.50. 70 per unit and variable expenses are tk 40 per units.00.

Net operating income/loss Net loss = 90.90.40.60.000 taka .857% Break even in taka sales = Fixed Expense / CM ratio = 540000/0.000 2. 2 reduction per unit 40 . Present Break even point in units Items taka/unit Sales 70 Variable expenses 40 Contribution Margin 30 Fixed expense 5. sales increase by 5000 units if tk.000 taka 3.4285714 = 12.000 units Break-even in taka sales CM ratio = Contribution Margin X 100 Sales = 30 X 100 70 = 42.000 Break even point in units = Fixed Expense Contribution Margin = 540000 30 = 18.

000 only.So.000 and per unit selling price 68 taka only. Break-even point in new selling price CM ratio = 5.000 units sold.60.428 taka Break even in units = 13.60. 4.11.176471% Break even in Sales taka = Fixed expense / CM ratio = 540000/0.000 Net operating income 20.11.428/ 68 = 19286 units 41 . Profit will be as follows : Items taka Sales (20000 X 68) 13.000 Contribution Margin 5. Unit 20.00.000 Variable expenses (20000 X 40) 8.000 Maximum profit earn as per market suggestion is taka 20.40.000 X 100 13.60.000 Fixed expense 5.41176471 = 13. selling price will be 70 -2 = 68 taka and total unit will be 15000 + 5000 = 20.60.000 = 41.