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February 16, 2020 at 7:47 pm
Hello mr. Jone, please assist me to solve this question.
Product chair Table
Variable cost/unit$ 120 16 Contribution sales ratio 0.4 0.6
Annual fixedcost $ 100000
What is break-even point in sales revenue (to the nearest hundred dollar)
A $ 210,500 B $ 178,60 C $ 200,000 D $ 204,500
October 13, 2019 at 1:40 pm
Hi, brilliant lecture as always. So effectively in a basic manufacturing business where sales made = units products (i.e. no closing inventory) the GROSS PROFIT is actually TOTAL CONTRIBUTION and OPERATING PROFIT is the $200 in Example 1 (i.e. the FIXED COSTS are Admin expenses) right? I’m just trying to understand how these would be reflected on Financial Statements
John Moffat says
October 13, 2019 at 2:40 pm
If the fixed costs are non-production costs, then what you have written is correct. However the fixed costs could be production costs and if this was the case then both the gross profit and the operating profit would be 200.
April 10, 2019 at 10:30 am
Good refreshing lecture and as usual clear explanations.
April 10, 2019 at 12:48 pm
Thank you for your comment 🙂
October 23, 2018 at 3:41 pm
Thanks John for this brilliant presentation. However, from the graph, you used 500 units as the maximum output for the horizontal axis (x) instead of the budgeted sales and production of 300 units why? The same issue for the vertical axis (y) with a maximum value of $3,000 rather than $1,800 (300 x $6).Or was it done for illustrative purposes? Is it possible to read off contribution, variable cost and margin of safety from the graph? So the profit volume chart/graph can be drawn using the calculated BEP of 250 units and/or profit of $200 ((300 x $4 – $1,000 FC)
October 23, 2018 at 4:15 pm
It was simply to end up with a reasonably sized graph – there are no ‘rules’ about this 🙂
But do appreciate that you cannot be asked to draw the graph yourself in the exam. However you must understand it because one could be drawn in the question itself and you could be expected to interpret it.
October 23, 2018 at 5:34 pm
Okay Sir noted
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