3.

16 Contribution 40 Unit Sales 20000

Fixed Costs 200,000 SP pu 100
VC pu 60

a Contribution Margin 800,000

40.00%

Operating Income Contribution 800,000

FC 200,000
Operating Income 600,000

b New VC pu 30
New Contribution pu 70
New Fixed Costs 700,000

New Contribution
Margin 70.00%
Contribution 1,400,000
New Operating Income 700,000

Can accept the accept

the propsal as the OI
c inproves by 100000.
3.19 Unit Sales
SP pu 3000
VC pu 2100
Sales Commission pu 150
Contribution pu 750
Fixed Manuf. Cost 12000000
Fixed Mark. Cost 3000000
Tax rate 0.25

1 BEP 20000

2a Units for TOI 45L 26000

2b Units for NOI 45L

Operating Income for 45L Net Income 6000000

Units 28000

3a New Contribution pu 825

Units 25454.55

3b New SP pu 3250

New Sales Comm. pu 162.5

New Contribution pu 987.5

Units 21265.82

3c New VC pu 2300
New Manuf. Fixed Costs 4800000

New Contribution pu 550

Units 25090.9
3.20 BEP Revenues 1500000
Fixed Costs 720000

1 At breakeven Contribution=Fixed Costs

Contribution margin 48.00%

2 VC pu 13

SP pu (SP -13)/SP=48%
.52SP = 13
SP pu 25

3 Units sold 90000

MOS Sales units - BEP units

Contr pu 12
BEP in units 60000

MOS 30000
MOS $$ 750000

4 Loss when sales are < 30000 units

3.21 Sales price per concert 45000
Marketing VC per concert 10000
Guest fees VC per concert 18000

Art Director fees per year 330000

Lease payments @40000 pm 480000
Donations expected 300000
Fixed Costs 510000

1 BEP 30.00

2 Mark director cost 255000

Total FC 765000

BEP 45

Operating Income:

Contribution 697000
FC 765000
Operating Income -68000

3 Addirional grant 170000

Total FC 595000

BEP 35
3.22 X Y Z
Contribution margin 15 10 5
Units forecasted 10000 50000 40000
Ratio of Units at breakeven 1 5 4

1 Break even Contribution=Fixed Cost

15x 50x 20x

85x=510000 fixed costs
x= 6000

Breakeven Units 0 0 0

2 Total Contribution 150,000 500,000 200,000

Total Contribution 850,000

Operating Income 340,000

3 X Y Z
Units forecasted 10000 40000 50000
1 4 5

15x 40x 25x

BEP 80x=510000
6375

Breakeven units 0 0 0
3.23 Purchase VC pu 60
SP pu 90
Contribution pu 30

Fixed costs ₹ 480,000

Per order shipment costs 120

1.a Total contribution 1200000

FC ₹ 480,000
Shipment costs 120000
Operating Income ₹ 600,000

1.b Total contribution 1200000

FC ₹ 480,000
Shipment costs 96000
Operating Income ₹ 624,000

2 Shipment costs ₹ 60,000

FC ₹ 480,000
total fixed costs ₹ 540,000

Break even units 18,000

Break even units depend

on the shipment costs
that vary with the no. of
3 shipments
3.26
1 Revised Income Statement for Contribution

Sales/Revenue ₹ 1,000,000
Variable Manufacturing Costs ₹ 550,000
Variable Marketing Costs ₹ 50,000
Contribution ₹ 400,000

Fixed Manufacturing Costs ₹ 200,000

Fixed Marketing & Admin Costs ₹ 100,000

Operating Income ₹ 100,000

2 Contribution Margin % 40%

Sales price pu ₹ 100

Contribution pu ₹ 40

BEP In Units 7500

BEP In Revenue ₹ 750,000

BEP In Revenue ₹ 750,000

3 Units sold 10,000

Margin of Safety(MOS) 2,500

4 Sales units 8000

Sales revenue ₹ 800,000

Contribution ₹ 320,000
Fixed Costs ₹ 300,000

Operating Income ₹ 20,000

Tax ₹ 6,000

Net Income ₹ 14,000

3.30
1 Current Charge per page ₹ 1.50
VC per page(.4+.5) ₹ 0.90
Contribution per page ₹ 0.60

Fixed Leasing Costs ₹ 12,000

BEP in units 20,000

New Agreement:

Commission per page 0.4

Charge per page ₹ 1.50

VC per page(.4+.5) + .4 ₹ 1.30
Contribution per page ₹ 0.20

New BEP in units ₹ -

0 Fixed Costs as leasing costs are factored in as Comission per page

2 Under fixed leasing .6x-12000

Under commission based model .2x

Point of indifference between the alternatives .4x=12000

30,000

for upto 30,000 pages the company prefers Commission based model
for pages>30,000, the company would prefer fixed leasing model

For example at 10,000 units

profit under fixed leasing -6000

profit under commission based model 2000

The commission model is preferable

For example at 40,000 units

profit under fixed leasing 12000

profit under commission based model 8000

Fixed leasing model is preferable