lso sir, to calculate the %margin could we use difference in contribution / budgetes contribution instead of revenue? yes we can thank you for all your replies

Dear Sir, thank you for the lecture, to calculate the breakeven when producing in the order of c/s ratio, could we not divide 8000 by the contribution of p and then multiply by the selling price of P?

Thanks for every sacrifice you have paid for us, and I don’t know ho to thank for you .

Sir i have a question and i feel confused for calculating it, and i wish you will help me to understand this question, it’s not on ur notes, i pick up it while i was working on BPP revision kit .

A company makes and sells a single product. When sales per month are $6.8Million, total costs are $6.56 Million. When sales per month are $ 5.2Million, total costs are $5.44 Millions. There is a step cost increases of $400000 in fixed costs when sales are 6.0 Million, but variable unit costs are constant at all levels of output and sales.

What is breakeven point for sales revenue per month?

A: $6.0 Million B: There are two breakeven points: $5.64 million and $6.36 million. C: $5.64 million only. D: $6.36 million only.

Great lectures. Probably not the right place for this question, but I saw the problem Abdulkadir had posted.

If costs are on y axis (dependent) and sales on x – Ignoring all step increases, the slope between two points would be …..??? Percentage sales atributable to variable cost ?

Eg. if change in sales of 10 leads to change of costs of 2( slope of .2), wouldn’t that mean variable costs are .2 ie 20% of sales ?

Sorry, I am little fuzzy on my fourth grade geometry

Sorry,just one more question ; previous setup x- sales y-costs and we have 2 data points. Wouldn’t C/S ratio be 1- the slope, assuming sales grow faster than costs ( ie slope is between 0 and 1) ?

Again, please ask in the Ask the Tutor Forum and not as a comment on a lecture. (The CS ratio cannot possibly be 1 unless there are no costs at all, which would be ridiculous)

Yeah, I get that. What I meant to write more clearly is 1 MINUS the slope (ie variable costs). These questions are based on the problem Abdulkadir’s posted.

I will ask it in the Forum.

Thank you for the response and for being awesome 馃檪

ajiosasays

Hello Sir,

I am confused by the description of the horizontal axis in the PV graph.

You have used “Sales, Revenues”, houldn’t it be rather units?

I am having a hard time thinking how we should round off the values. If we round off the average C/s ratio in part b) to 3 decimal places it is giving a value in part c) of $26,402. However, if we use the calculator answer or 5 decimal places in part b) like you used in the previous lecture, it is giving a value in part c) of 26,434. So which way is correct and which way would you suggest for us to do? Also which way is acceptable in the exam? Thank you so much for the lectures.

To calculate Breakeven Revenue, you’ve used the equation Fixed Cost/ Avg CS ratio. Seen the lecture couple of times, but unable to figure out why use avg cs ratio in the equation.

Because there are three products and we are assuming they are being sold in the same ratio. Provided the ratio stays the same then the average CS ratio will also stay the same.

addisanopacourage says

Hi John

Thank you for the lecture!

John Moffat says

Thank you for your comment 馃檪

loukasierides says

also sir, to calculate the %margin could we use difference in contribution / bug contra instead of revenue?

loukasierides says

lso sir, to calculate the %margin could we use difference in contribution / budgetes contribution instead of revenue?

yes we can thank you for all your replies

loukasierides says

Dear Sir, thank you for the lecture, to calculate the breakeven when producing in the order of c/s ratio, could we not divide 8000 by the contribution of p and then multiply by the selling price of P?

John Moffat says

But that is exactly the same as dividing by the CS ratio (because the CS ratios the contribution divided by the selling price)!!!

loukasierides says

oh i see , thank you very much!

loukasierides says

its just that i get a slightly different answer

John Moffat says

I guess that will only be because of rounding.

studyhard93 says

Goodnight Sir

where you got the $23400 as breakeven, i thought it was $26402

John Moffat says

Sorry – I should have written 26402, not 23400

kadiye02 says

Thanks for every sacrifice you have paid for us, and I don’t know ho to thank for you .

Sir i have a question and i feel confused for calculating it, and i wish you will help me to understand this question, it’s not on ur notes, i pick up it while i was working on BPP revision kit .

A company makes and sells a single product. When sales per month are $6.8Million, total costs are $6.56 Million. When sales per month are $ 5.2Million, total costs are $5.44 Millions. There is a step cost increases of $400000 in fixed costs when sales are 6.0 Million, but variable unit costs are constant at all levels of output and sales.

What is breakeven point for sales revenue per month?

A: $6.0 Million

B: There are two breakeven points: $5.64 million and $6.36 million.

C: $5.64 million only.

D: $6.36 million only.

Thank you sir, wish u will help me.

John Moffat says

Please ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.

bballhawk says

Great lectures. Probably not the right place for this question, but I saw the problem Abdulkadir had posted.

If costs are on y axis (dependent) and sales on x – Ignoring all step increases, the slope between two points would be …..??? Percentage sales atributable to variable cost ?

Eg. if change in sales of 10 leads to change of costs of 2( slope of .2), wouldn’t that mean variable costs are .2 ie 20% of sales ?

Sorry, I am little fuzzy on my fourth grade geometry

bballhawk says

Sorry,just one more question ; previous setup x- sales y-costs and we have 2 data points.

Wouldn’t C/S ratio be 1- the slope, assuming sales grow faster than costs ( ie slope is between 0 and 1) ?

John Moffat says

Again, please ask in the Ask the Tutor Forum and not as a comment on a lecture. (The CS ratio cannot possibly be 1 unless there are no costs at all, which would be ridiculous)

bballhawk says

Yeah, I get that. What I meant to write more clearly is 1 MINUS the slope (ie variable costs). These questions are based on the problem Abdulkadir’s posted.

I will ask it in the Forum.

Thank you for the response and for being awesome 馃檪

ajiosa says

Hello Sir,

I am confused by the description of the horizontal axis in the PV graph.

You have used “Sales, Revenues”, houldn’t it be rather units?

John Moffat says

Most commonly it is sales revenue, rather than units.

iyamu says

The break even you used previously was in units and not in revenue

Break even in unit = fixed cost/ contr p.u

John Moffat says

Breakeven can be measured in either units or in revenue – the exam makes it clear which is wanted.

iyamu says

The previous lecture where you calculated the break even revenue , you did used break even units * selling price

Which 250units * $6= $1500

Is this different in any way using this formular here?

emanwahied says

I am having a hard time thinking how we should round off the values. If we round off the average C/s ratio in part b) to 3 decimal places it is giving a value in part c) of $26,402. However, if we use the calculator answer or 5 decimal places in part b) like you used in the previous lecture, it is giving a value in part c) of 26,434.

So which way is correct and which way would you suggest for us to do? Also which way is acceptable in the exam?

Thank you so much for the lectures.

John Moffat says

You do not lose marks for rounding in the exam, so don’t worry.

shyamkumar says

Hello Sir,

To calculate Breakeven Revenue, you’ve used the equation Fixed Cost/ Avg CS ratio. Seen the lecture couple of times, but unable to figure out why use avg cs ratio in the equation.

John Moffat says

Because there are three products and we are assuming they are being sold in the same ratio. Provided the ratio stays the same then the average CS ratio will also stay the same.

guardian96 says

Hi Sir

The C/S ration should be presented as a ratio or a percentage? In F5 December 2012 Question 01 part ‘A’ answers it is represented as a ‘%’

John Moffat says

It doesn’t matter. I explain this in the lecture.

determined016 says

Hi Sir,

Would the breakeven contribution per unit be: 41400/21600 = $1.92 p.u.?

John Moffat says

Calculating a breakeven contribution per unit would be meaningless.