TC = VC + FC

CM = TR - VC

Break Event Point

Net income is zero
TR = TC
TR = VC + FC
PxQ = VC/Unit x Q + FC
FC = (P X Q) - (VC/Unit x Q)
FC = Q (P-VC/Unit)
FC = Q x CM/Unit
Q = FC / CM per Unit Break Event Point

Price 500 A
VC/unit 300 B
CM/unit 200 C = A-B

Fixed Cost 100,000 D

How much Quantitiy need to be sold in BEP

BEP in Quanti 500 unit E = D/C

Financial Statement

Revenue 250,000 AxE

Variable Cost 150,000 BxE
Contribution Margin 100,000
Fixed Cost 100,000 D
Net Income - Break Event Point

Target Profit (Net Income) 500,000 F USD

Q = FC / CM per Unit Break Event Point

Q = (FC + Target Profit) / CM per Unit Target Profit

Target Profit 3,000 Q Sold unit (D + F)/C G

Financial Statement

Revenue 1,500,000 A x G
Variable Cost 900,000 B x G
Contribution Margin 600,000
Fixed Cost 100,000 D
Net Income 500,000
A manufacturing company is planning to sell
a batch of 25 special machines (Job 650) to a
Job 650 25 batch of special machines
retailer for $114,800. Sales 114,800.00
Step 1:
Cost Object Job 650
The cost object is Job 650.
DM 50,000.00
Step 2:
DL 19,000.00
Direct costs are: Direct materials = $50,000
Direct manufacturing labor = $19,000 Allocation based on Machine Hours
Job 650 500.00 Hours B
Total Job 2,480.00 Hours C

Total OH 65,100.00 A

OH per machine hours 26.25 D = A/C

OH Job 650 13,125.00 D x B

Financial Statement

Revenue 114,800.00
Expenses :
DM 50,000.00
DL 19,000.00
OH 13,125.00
Manufacturing Expenses 82,125.00

Net Income 32,675.00

 Allocation OH Cost with Unit Sold

Regular Deluxe
Price 40 50
Cost/Unit
DM 15 15
DL 10 20
OH? 10 10
Total Cost/unit 35 45

Financial Statement Regular Deluxe

Revenue 40,000.00 50,000.00

DM 15,000.00 15,000.00
DL 10,000.00 20,000.00
OH 10,000.00 10,000.00
Total Cost 35,000.00 45,000.00

Net Income 5,000.00 5,000.00

Allocation OH with Labor Hours

Regular Deluxe
Price 40 50
Cost/Unit
DM 15 15
DL 10 20
OH? 6.67 13.33
31.67 48.33
Financial Statement Regular Deluxe
Revenue 40,000 50,000

DM 15,000 15,000
DL 10,000 20,000
OH 6,667 13,333
Total Cost 31,667 48,333

Net Income 8,333 1,667

Regular Deluxe
Price 40 50
Cost/Unit
DM 15 15
DL 10 20
OH?
OH Maintenance 3 12
OH Shipping 1 4
Total Cost 29 51

Financial Statement Regular Deluxe

Revenue 40,000 50,000

DM 15,000 15,000
DL 10,000 20,000
Overhead: -
OH Maintenance 3,000 12,000
OH Shipping 1,000 4,000
Total Cost 29,000 51,000
Net Income 11,000 (1,000)
 Overhead Cost USD
Maintenance 15,000
Shipping 5,000
20,000 A

Allocation OH with Unit Sold Unit Sold

Regular 1,000.00
Deluxe 1,000.00
2,000.00 B

OH per unit 10 A/B

10,000.00

Overhead Cost USD

Maintenance 15,000
Shipping 5,000
20,000 A

Allocation OH with Labor Hours Hours Qty Sold Working Hours

Regular 1 1000 1000
 Deluxe 2 1000 2000
3000 B

Cost per Hour 6.67 A/B

10,000.00

Overhead Cost USD

Maintenance 15,000 A
Shipping 5,000
20,000

Maintenance - Machine Hours

Product Machine HoQty Sold Total Hours
Regular 1 1000 1000
Deluxe 4 1000 4000
5000 B
Cost/hour 3 A/B

Shipping - No of Shipping (Lots)

Product Lots Qty Sold Total Shipping
Regular 40 1000 25
Deluxe 10 1000 100
125
Cost/Shipping 40
10,000
 Actual Flexible Budget

Unit Sold 585.00 585.00

DM 112,554.00 192.4 102,375.00

DL 28,641.60 48.96 29,250.00
Total 141,195.60 131,625.00
9,570.60
Unfavorable
xible Budget Static Budget

528.00
Cost/unit Variance
10,179.00 U 92,400.00 175 20,154.00 U
(608.40) F 26,400.00 50 2,241.60 U
118,800.00 22,395.60
12,825.00 Production Volume Variance
Year 0 1 2 3
Fixed capital investment $ -50,000
Cash inflow from reduced labor cost $ 18,000 $ 18,000 $ 18,000
Cash inflow from the sale of the machine
Cash flows $ -50,000 $ 18,000 $ 18,000 $ 18,000
Discount rate 18% 18% 18% 18%
Present Value - 50,000 15,254 12,927 10,955
Net Present Value $ 8,475

Net Present Value $ 8,475 Interest rate should be equal for every year

Year 0 1 2 3
Cash flows $ -50,000 $ 18,000 $ 18,000 $ 18,000
Discount rate 18% 18% 18% 18%
Present value - 50,000 15,254 12,927 10,955
Cumulative present value cash flows - 50,000 - 34,746 - 21,818 - 10,863

Discounted Payback Period 4.16 years

0.16

IRR 25% 0.2504298

Year 0 1 2 3
Cash flows $ -50,000 $ 18,000 $ 18,000 $ 18,000
Cumulative cash flows $ -50,000 $ -32,000 $ -14,000 $ 4,000

Payback period 2.78 years

 4 5

$ 18,000 $ 18,000
$ 5,000
$ 18,000 $ 23,000
18% 18%
9,284 10,054

qual for every year

4 5
$ 18,000 $ 23,000
18% 18%
9,284 10,054
- 1,579 8,475

4 5
$ 18,000 $ 23,000
$ 22,000 $ 45,000