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- May 31, 2016 at 3:17 pm #318441
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| Quote Edit | Reply May 31, 2016 at 3:16 pm

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JanaParticipant

Hi Sir John,

I was watching your video about CVP analysis and question Dec 2012/Hair Co..

I have a question to the the part c) in Q Dec 2012/Hair Co. when you did calculate 2.200.000 with contribution 60=

1.200.000 how can you get 1.200.000?

my computation Total revenue / contribution for C=2.200.000/60=36.667.?

Can you please tell me how you arrived to 1.200.000?

And also how you arrived to1.232.000 for S? when I multiply 3.520.000*56=197.120.000?!Next question is about your video CVP analysis part 1.

total contribution =67%* total revenuehow did you get the figure profit $320 from?

Yes, I understood your part to add FC $1,000 +$320= $1320 Total contribution. I just dont understand how you arrived to $320 profit? When we knew only the amount of FC.Also next Q: when I did computation total revenue = 1,320/0.67=$1,970.14 but you have $1,980. So, please what figure is correct?

Thank you very much for your answer.

Regards.May 31, 2016 at 3:31 pm #318451Hair:

If they make C and get revenue of 2.2M, then the contribution will be $1.2M – the workings are in part (a).

If they then make S, they will get extra contribution of 1.232M (the workings are in part (a)) and since there will be no extra fixed overheads then profit will increase by 1.232M as well.

CVP lecture:

The question (it is example 3) actually says that they want a target profit of 320!

(You should not watch the lectures without the lecture notes in front of you)The CS ratio is 0.66666. 1320 / 0.66666 = 1980 !!

May 31, 2016 at 3:57 pm #318454Yes, I realise that I rounded the contribution 0.66666 to 0.67 therefore I got different figure.

So, I think it is not good to round up. The 1980 is therefore correct. Sorry.To Hair Co. Yes, now I see it was in part a) Thank you.

How did you arrive to figure 560.000? in the total profit in part C) Hair CO?

May 31, 2016 at 5:23 pm #318466It wasn’t me – it was the examiner!!

If the contribution is 1,200,000 and the fixed costs are 640,000, then if you subtract the fixed costs from the contribution you arrive at the profit.

I do think you should watch the lectures on CVP again, because I approach my example in exactly the same way as the examiner has answered her question.

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