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The question says that c/s ratio is 60%.
So it’s contribution/sales=0.6
But it says that VC=40%. Is TC= VC/sales +C/S ratio???
Explain pls dear sir
It depends exactly what the question says.
If it says that variables costs are 60% of revenue, then contribution is 40% of revenue (so CS ratio is 40%).
Total cost is variable cost plus fixed costs.
Hello sir,
I have a similar question to this.
There are 4 products with variable costs given for each.
Fixed costs is $72000 and c/s ratio is expected to be 60%.
How to calculate profit or loss for each.please explain sir.
The question as you have typed it is impossible to answer because there is not enough information.
Had there only been one product then breakeven would be when the sales were 72,000/0.6 = $120,000. However the actual profit depends on what the actual sales are!!
With four products it becomes multi-product CVP analysis which means that even more information is needed.
Have you watched my free lectures on CVP analysis??
Hello sir,
Sorry maybe I misinterpreted the question..x is planning the launch of a new football product and 4 possible output levels are being considered depending on consumer reaction. the variable costs associated with these levels are as below:
Consumer reaction Adverse Average Good Excellent
variable costs ($000) 40 60 90 140Fixed costs of $72000 and c/s ratio is expected to be 60%.
Calculate profit or loss at each of the four levels.
Please explain how to do it sir and am still trying to look for the free lectures to watch not yet seen them
If the CS ratio is 60%, then the contribution is 60% of sales which means that the variable costs must be 40% of the sales.
Therefore, if the variable costs are $40,000, then the sales must be 40,000/40% = $100,000.
Therefore the contribution is $60,000 and there is a loss of $12,000.It is the same approach for each of the other three levels.
Two things about your post do puzzle me 🙂
One is that you cannot find the lectures, because it is the lectures working through the chapter in our free lecture notes that is called ‘cost volume profit analysis’. (The lectures are a complete free course and are therefore supposed to be watched in chapter order – to watch lectures at random is not sensible and is not the way to pass the exam!).
The other thing is as to why you are attempting a question for which you do not have an answer. You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations.
Million thanks sir,
I did find them..
I was just a little confuse..Thank you.
You’ve been a great help…:)
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