27/6/20

The co. is selleing units for Rs.150 each, the variable cost is Rs.1,250,000 and there is a loss of Rs.50,000. Prepare a contributio
The co. manufatured 12,000 units and 2,000 units are still at end.

ABC Company
Income Statement _ Contribution Approach
For the period ended …………

Sales 1,500,000
Less: Variable exp -1,250,000
Contribution Marg 250,000
Less: Fixed expens -300,000
Profit / Loss -50,000

Absorption Costing Variable Costing

DM xxxx
DL xxxx Reading of / in CVP in book
FOH Different situations / shortcuts
variable xxxx DOL
Fixed xxxx MOS
Product cost Multiple Income statement

Thursday at sharp 8 pm

After having the core concepts in CVP, now Total Per Unit
Sales Units 1,000
Sales 800,000
1 Break even point in variable expense 600,000
Units Profit 50,000
Sales amount
Degree of operating leverage B.E point in sales Rs. 600,000
Margin of safety
Multiple product Income statement How
Total Per Unit
Sales 800,000
variable expense 600,000
Contribution Marg 200,000
Fix3d expense 150,000
Profit 50,000

CM Format B.E point in RupeeFixed Cost / CM ratio

 B.E point in units =Fixed cost / CM per unit

Question: A firm is selling circuits for Rs.175 each, its variable cost is Rs.125 each and a total fixed cost is Rs.65,000.
Required: 1. How many units it must sell to have a breakeven point in units and Rupees?
2. If 1,000 units are selling, how much profit / losss is there?

Total
B.E point in units = 1,300 units sales 175,000
B.E point in Rupees = 1,300 units * Rs.175 = Rs.227,500Less:V.E 125,000
CM 50,000
B.E point in units =Fixed cost / CM per unit Less: FC 65,000
65,000 / 50 = 1,300 units Loss -15,000

B.E point in RupeeFixed Cost / CM ratio

65,000 / 28.57%
Rs.227,500

Equation Method:Sq = VCq + fixed cost + target profit

q = Units
S = Selling price / unit
VC = Variable cost / unit
FC = total fixed cost
TP = Target profit

Question : A man runs an stable and the following costs incur:

Feed per horse 2,000
vaccination per ho 500 total Variable expense Rs.2,500
Rearing & grazing 4,000 Total Fixed expens 55,000
Security 20,000
Grooming 30,000
Lighting 1,000

He charges Rs. 3,500 per horse.

Required: 1. How many horses he must keep in order to have a no profit and no loss situation. By using equation meth
2. If he charges only Rs.3,000, how many horses he must have to have a profit of Rs.20,000?
3. If there are only 100 horses and he wishes to earn a profit of Rs.20,000, how much cost he must charge ?

ANSWER 1. Sq = VCq + fixed cost + target profiANSWER 2.

3,500q = 2,500q + 55,000 + 0 3,000q = 2,500q + 55,000 + 20,000

3,500q - 2,500q = 55,000
q = 55,000 / 1,000

q = 55 Horses q = 150 Horses

Degree of operating leverage

Co.A Co.B
Sales 1,000,000 1,100,000 1,000,000
VE 700,000 770,000 400,000
CM 300,000 330,000 600,000
FC 200,000 200,000 500,000
P/L 100,000 130,000 100,000

There will be 10 % increase in sales in next month for both companies.

DOL = Contribution Margin / operatin300,000 / 100,000600,000 / 100,000

3 6
*10% *10%
30% 60%
Just like concept of lever in Physics
With a slight force you can pull a big object
like Jack in car

Margin of safety

Budgeted sales - 1,000,000 - 666,667 1,000,000 - 833,334

Rs.333,333 Rs.166,667

Assignment: You just have to make TEN MCQs questions with answers from the topic given to you.
And correct choice must be highlighted.
The font and size should be MS word , 11.
It can be quantitative or qualitative

QUIZ time: So after Saturday class.

0,000. Prepare a contribution format Income statement.

100
75

%
100
75
25

150,000 / 25%

Rs.600,000
 150,000 / 200
750 units

al fixed cost is Rs.65,000.

per unit %
175 100
125 71.42
50 28.57

tion. By using equation method

f Rs.20,000?
much cost he must charge ?

ANSWER 3.

S100 = 2,500*100 + 55,000 + 20,000

 S = 250,000 + 55,000 + 20,000 / 100

Rs.3,250

1,100,000
440,000
660,000
500,000
160,000

000 - 833,334

topic given to you.