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Cvp

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Cvp

  • This topic has 1 reply, 2 voices, and was last updated 8 months ago by Ken Garrett.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • April 24, 2020 at 12:33 pm #569149
    arowosegbemassive
    • Topics: 7
    • Replies: 3
    • ☆

    Hello sir ,pls how do I calculate level of revenue needed to yield an after tax income equal to 20%of sales :
    If SP IN UNIT IS #3000
    VC IS 1800
    FC IS 280420
    TAX 35%
    THANKS IN ANTICIPATION!

    April 24, 2020 at 4:43 pm #569162
    Ken Garrett
    Keymaster
    • Topics: 9
    • Replies: 8907
    • ☆☆☆☆☆

    Let V be the volume to be sold.

    Pre-tax profit = V (3000 – 1800) – 280420 = 1200V – 280420

    Post tax profit = 0.65 x [1200V – 280420]

    This must be equal to: 0.2 x V x 3,000 = 600V

    0.65[1200V – 280420] = 780V – 182273 = 600V

    180V = 182273

    V = 1012.63

    Revenue = 1012.63 x 3000 = 3037883

    Check: pretax profit = 3037884 – 1012.63 x 1800 – 280420 = 934729
    post tax profit = 934729 x 0.65 = 607574

    20% revenue = 20% 3037883 = 60758

    ie the same except for rounding errors.

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