1. Profile photo of Noureen says

    Hi John,

    I was practising few CVP questions from Kaplan and in one of the questions they asked to calculate the BE point in terms of Units and $ of revenue so if it is asked in exam and if I’m calculating BE in revenue terms do I have to calculate the CS ratio first and then divide fixed cost by CS ratio or can I do just multiply the BE units with the Selling price to reach the answer do I have to elaborate it or just multiply directly.

    Many thanks

  2. avatar says

    Hello john,

    I am confused Here:
    Currently: SP was 20. Vc was 8. Fc was 840000pa.
    So breakeven was 840000/12 which is 70000units.

    But When they carriedout newplant FC Has 1200000pa But Vc decreased to 5pu.
    So Now breakeven was 1200000/20-5 which is 80000units.

    Now if the Company Wanted to B/even same quantity as old the Selling Price would be like: 70000*X=1200000 which comes 17.14 for the Contribution PU. So 17.14+Vc 5 which is 22.14 will be the selling price.

    The Next part is confusing for me: Please help me here more.

    If the new plant is built, the company would wants to decrease its price to $19 to improve its competitive position.

    i. At which quantity would profits of the old and the new plants be equal (assuming the price of a toaster is $20 for the old plant but $19 for the new)? How much would the profit be at this quantity?

    ii. If sale are projected to reach 150,000 units per year in the near future, would you recommend construction of the new plant? Why or why not? (Assume that both plants have the capacity to produce this quantity.)

    Can you please Tell me how to do this one. Please soon. Thankx

  3. avatar says

    Hi John

    How would I work this out,

    ‘The budgeted profit statement of a company, with all figures expressed as a percentage of revenue is as follows:

    Revenue: 100
    Variable cost 40
    Fixed cost 20
    Profit 40

    If the sales volume turns out to be only 80% of that budgeted, the profit, expressed as a percentage of the revised revenue will be in %.’

  4. avatar says

    Hi John

    Could you please work this out: Revenue for Product A = $10m C/S ratio: 15%,
    Product B: $20m C/S ratio: 10%

    Total fixed cost: $5.5m and company wants to earn a profit of $1m

    What is the revenue that needs to be generated by Product C, in million, to achieve the required profit?

  5. avatarTemperance says

    @ Johnmoffat

    Hi Sir, will I loose marks in exam if I use pen to draw graphs? The graph paper I am currently using to practice is very deep and the graph is not showing as clearly.

  6. Profile photo of sneha g says

    I am not attending any formal coaching… . I would like to know why many. Sites ask us to refer to the student articles . Why are these articles so important ? Does a certain percentage of the question paper happen to be from the articles ?

  7. avatar says

    Please any one can tell me if it is necessary to complete Professional ethics module to convert from FIA suite to ACCA qualification.
    I have passed my FIA papers but still not converted to ACCA qalification from FIA suite.Please guide me what next to do…………………?

  8. avatar says

    breakeven point should be at the point where revenue line cross the fixed cost line and lose range would b under the fixed cost line? this is my understanding sorry!!!, but in lecture breakeven is being point out where total cost cross the total revenue? lost also showing same way?, Am really confuse about it!! i would be great full if you could explain it please. thx.

    • Profile photo of John Moffat says

      Your understanding is wrong.

      Breakeven is when the profit is zero. Profit will be zero when the total revenue is equal to the total costs (fixed costs + variable costs).

      I think that what you are confusing it with is that for zero profit, the total contribution will be equal to the fixed costs – contribution equals the revenue minus the variable costs.

      You should watch the lecture again slowly.

  9. avatar says

    Hello John,

    Thanks for great lectures. Just wanted to ask how important is CVP for Dec 2012 exams, as i checked the exam kit and CVP doesn’t seem to appear in last 6 exam sessions though it appears as a part of the syllabus. I’m a bit confused.


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