Sr Particulars Amount New 50K

1 Machine refurbished 35000 7000 5000

2 Financing cost at 10% 3500 5000
3 Drum and film 2800/2yrs 1400 1300
4 Shop electricity 250 pm 3000
5 Shop rent 100 pm 1200
6 paper cost 0.2 0.2
7 toner cost 800/25000 copies 0.032 0.03
8 power consmption 0.04 0.04
9 Repairs and Maint Cost or Exp 1000 0
10 Ravinders Foregone Salary 30000

Financing cost at 15 per cent 5250 7500

Marginal Cost Analysis

Sales per unit sp
- VC per unit VC
= Contribution per unit cont
- Fixed Cost (op n financing)
= Operating Profit Break Even Units
- Tax BE to TOI
= PAT FC with opportunity cost
a,b,d BE to cover Salary
Full FC with New MC
VC
Cont
BE for New MC

c Financing cost

e profit

f daily biz 60 copies

no of days 300
 no of copies 18000
revenue 13500
Old machine total cost 47796
profit/loss -34296
new machine total cost 46160
profit/loss -32660

g
institute 9000
New machine

for retail

h visit cost 1500

refurbished machine SP
FC
Contribution
BE

New machine SP
FC
Contribution
BE

i salary 1500
total
refurbished machine SP
FC
Contribution
BE

New machine SP
FC
Contribution
BE
As per the analysis done the break even units are found to be more
so he should not enter this new business as it will be very difficult
 Fixed/VariaDirect/Indir relevent/Sunk Irrelevent
pa F D R
pa F D R
pa ? Variable F D R
pa F I Ir
pa F I Ir
per unit V D R
per unit V D R
per unit V D R
pa Provising F D R
pa F D R (opportunity Cost0

1 0.75 0.5
0.272 0.272 0.272
0.728 0.478 0.228
12900 12900 12900
17720 26987 56579

42900 42900 42900

58929 89749 188158
41300 41300 41300
0.27 0.27 0.27
0.73 0.48 0.23
56575 86042 179565

at 15 per cent
FC(old) 44650 44650 44650
BE(old) 61332 93410 195833
FC(new) 43800 43800 43800
BE(new) 60165 91632 192105

2000
BE(old) 61676 93933 196930
BE(new) 59315 90208 188261

.75rs
 rs 0.75
contribution 4320
FC to cover 38580
cont for re 1 0.73
BE to cover rem FC 52849
plus institutional 9000

total biz 61849

daily biz 206

1 0.75 0.5
44400 44400 44400
Contribution 0.728 0.478 0.228
60989 92887 194737

1 0.75 0.5
42800 42800 42800
Contribution 0.73 0.48 0.23
58630 89167 186087

pm
18000
1 0.75 0.5
60900 60900 60900
Contribution 0.728 0.478 0.228
83654 127406 267105

1 0.75 0.5
59300 59300 59300
Contribution 0.73 0.48 0.23
81233 123542 257826
 the break even units are found to be more than the estimated profit from the business,
his new business as it will be very difficult to generate profit.