Change in profit of revised revenue

SSamit10y ago

Dear Sir, how to work out the following question: 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 %.’ Thanks.

John MoffatTutor10y ago#1

If the sales volume is only 80%, then the sales revenue will only be 80% of the budgeted amount. The variable cost will only be 80% of the budgeted amount, but the fixed costs will (be definition) be unchanged. So you can calculate what the new profit will be and express that as a % of the new revenue.

SSamit10y ago#2

Sir, is the following working correct: Revised Revenue: 80% of budgeted = 80% of 100 = 80% V.C: 80% of budgeted = 80% of 40 = 32% F.C. unchanged = 20% So, profit = 80% - (32+20)% = 28% In terms of % of revised revenue(100%): V.C = 32/80 = 40% F.C = 20/80 = 25% Profit = 28/80 = 35%

John MoffatTutor10y ago#3

Yes - that is correct :-)

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