Unit 3.

break even analysis

selling price/unit = $100

Variable price/unit = $45

Contribution/unit = selling price/unit -- Variable price/unit

Contribution cost is the sum of money that remains after direct and variable costs have been taken away
from sales revenue

Total contribution = (selling price/unit -- Variable price/unit) x quantity

Margin of safety = Actual sales – breakeven sale

55/unit x $ 200 = $ 11 000

Profit = $ 11000 - $ 5000

Profit = $6000

Breakeven = fixed cost/ Contribution per unit

Breakeven point is when the company will be not gaining or losing money

Anything under breakeven point is a loss for the business and anything above is a profit

Profit = total sales – total cost

Total cost = total variable cot + total fixed cost

Total sales = quantity x price

Margin of safety = actual sales – break even sales

Target profit output = (fixed cost + target profit)/contribution per unit

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Productive task:

Selling price per unit = $330

Fixed cost = $6400

Variable cost = $130

Output = 66

$330 - $130 = $200 = contribution

$200 x 66 = 13 200 = total contribution

A) 6400 / 200 = 32 = breakeven point

B) 66 – 32 = 34 = margin of safety

C) 66 x 330 – (130 x 66 + 6400) = $6800

30Q = 3500 + 10Q

30Q – 10Q = 3500

20Q = 3500

Q = 3500/20

Q = 175
Case study – practice
1)variable cost/unit= 11.9$

Fixed cost=$42 000

Contribution=$5.1

A) wages and raw materials

B) it is the sum of money that remains after direct and variable costs have been taken away from sales
revenue

C)

i) Breakeven point = 42 000/5.1

=8235.29

ii )

2) 200= 3000/15

Breakeven point = 200

Margin of safety = 500 – 200

= 300

Fixed cost=3000

Variable cost=12/shirt

=12000

Total sales=1000

Revenue=22000

Selling price=22/unit

Total cost = 12000+3000

= 15000

Profit= 22000 - 15000

=7000

Atlas Fit

Fixed cost= 60 000/year

Variable cost=45/employee

=32715

Contribution=100

Break even point = 60 000/100

=600

Calculation-activity 1
Fixed cost = $2500

Variable cost = $70

Prices per bicycle is $120

Target profit= 1500

Target profit output = (2500+1500)/50 = 80 bicycle

Activity 2
Fixed cost = $2500

Variable cost = $50

Target profit output= 200 bicycle

Targeted profit= $6500

200=(2500+6500)/(x-50)

200(x-50)=9000

200x – 10000 = 9000

200x=19000

X=95