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Analysis
Sales $250,000
Less: variable expenses 150,000
Contribution margin 100,000
Less: fixed expenses 100,000
Net income $ -
$80,000
= 400 surfboards
$200
$80,000
= $200,000 sales
40%
X = 400 units
400,000
350,000
300,000
250,000
200,000
50,000
-
- 100 200 300 400 500 600 700 800
400,000
350,000
300,000
150,000
100,000
50,000
-
- 100 200 300 400 500 600 700 800
300,000
250,000
200,000
150,000
100,000
50,000
-
- 100 200 300 400 500 600 700 800
400,000 Break-even
350,000
point
300,000
250,000
200,000
150,000
100,000
50,000
-
- 100 200 300 400 500 600 700 800
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
- 100 200 300 400 500 600 700 800
$-
$- $50 $100 $150 $200 $250 $300 $350 $400
$(20,000)
$(40,000)
$(60,000)
$(80,000)
$(100,000) 1 2 3 4 5 6 7 8
Units sold (00s)
I.K. Gunarta – Jurusan Teknik Industri ITS 20
Profit-Volume Graph
$100,000
$80,000 Break-even
$60,000 point
$40,000
$20,000
$-
$- $50 $100 $150 $200 $250 $300 $350 $400
$(20,000)
$(40,000)
$(60,000)
$(80,000)
$(100,000) 1 2 3 4 5 6 7 8
Units sold (00s)
I.K. Gunarta – Jurusan Teknik Industri ITS 21
Profit-Volume Graph
$100,000
$80,000
$60,000
$40,000
$20,000
$-
$- $50 $100 $150 $200 $250 $300 $350 $400
$(20,000)
$(40,000)
$(60,000)
Sales revenue
$(80,000)
$(100,000) 1 2 3 4 5 6 7 8
Units sold (00s)
I.K. Gunarta – Jurusan Teknik Industri ITS 22
Profit-Volume Graph
$100,000
$40,000
$20,000
$-
$- $50 $100 $150 $200 $250 $300 $350 $400
$(20,000)
$(40,000)
$(60,000)
$(80,000)
$(100,000) 1 2 3 4 5 6 7 8
Units sold (00s)
I.K. Gunarta – Jurusan Teknik Industri ITS 23
Profit-Volume Graph
$100,000
$80,000
$60,000
$40,000
$20,000
$-
$- $50 $100 $150 $200 $250 $300 $350 $400
$(20,000)
$(40,000)
$(60,000)
$(80,000)
$(100,000) 1 2 3 4 5 6 7 8
Units sold (00s)
I.K. Gunarta – Jurusan Teknik Industri ITS 24
Target Net Profit
We can determine the number of
surfboards that Curl must sell to earn a
profit of $100,000 using the contribution-
margin approach.
$80,000 + $100,000
= 900 surfboards
$200
I.K. Gunarta – Jurusan Teknik Industri ITS 27
Equation Approach
Sales revenue – Variable expenses – Fixed expenses = Profit
($200X) = $180,00
X = 900 units
Fixed expenses
Given:
{ Unit contribution margin
Expected sales volume } Find: {expected profit}
Number % of
Description of Boards Total
Surfboards 500 62.5% (500 ÷ 800)
Sailboards 300 37.5% (300 ÷ 800)
Total sold 800 100.0%
I.K. Gunarta – Jurusan Teknik Industri ITS 41
CVP Analysis with Multiple
Products
Weighted-average unit contribution margin
Contribution Weighted
Description Margin % of Total Contribution
Surfboards $ 200 62.5% $ 125.00
Sailboards 550 37.5% 206.25
Weighted-average contribution margin $ 331.25
$200 × 62.5%
Break-even $170,000
=
point $331.25
Break-even
= 514 combined unit sales (rounded up)
point
$100,000
= 5
$20,000
I.K. Gunarta – Jurusan Teknik Industri ITS 48
Measuring Operating Leverage
A measure of how a percentage change in
sales will affect profits.
We made
it!