Comments

  1. avatar says

    I am sure that i am mistaked but I have heard that you call 8,000 of fixed costs as contribution. my understanding is that breakeven revenue= fixed overhead/cs ratio. for example for P =8,000/37.9% but contribution for P itself is different number and should not be taken into account for calculating brealeven revenue for P? Please explain as i am confused . thanks

    • Profile photo of John Moffat says

      You must have either misheard me or misunderstood me.

      Breakeven occurs when the profit equals zero, which is when total contribution equals the fixed costs.
      That is the reason that the breakeven revenue is equal to the fixed costs / CS ratio.

  2. avatar says

    Hello sir,

    Example 6 -part d – calculate break even revenue. Can you please explain why technique below doesnt work :(

    Breakeven revenue =breakeven volume x S.P

    Break even volume = 8000/4.65 (total cont/unit for all products) = 1720 units

    So, 1720 x $18 (total S.P for all products) = 30,967

    i was hoping the answer would be the same as yours, but its not. Please tell me where I went wrong.

    Thanks a lot.

    D

    • Profile photo of John Moffat says

      The problem is that you cannot use the total contribution – you need to use the weighted average contribution per unit.

      If you watch the free lecture then you will see how I get the answer to this example (you must not study using just the course notes – it is in the lectures that we go through the examples and explain more. If you are unable to watch the lectures then there is no choice but to buy a Study Text and study from there.)

  3. Profile photo of Nikhil says

    Hello Mr Moffat,

    I really love all your lectures and I personally think you are the best teacher I must have come across in my time. No lecturer at my college is as good as you. I was wondering if by any chance you could upload lecture for Short Term decision making. Or if they are available elsewhere, that would be great to know.

    Thanks again for your efforts.

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