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CVP / Breakeven (Question)

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › CVP / Breakeven (Question)

  • This topic has 2 replies, 3 voices, and was last updated 8 years ago by iyamu.
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  • June 30, 2016 at 4:45 pm #324489
    sramesh12
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    A company has a single product with a contribution of sales ratio 40%. The total sales and net profit in a month were $200,000 and $10,000 respectively. the company has a target monthly profit of $16,000.
    What sales revenue is required to achieve monthly profit?

    July 1, 2016 at 1:37 pm #324531
    secondstar
    Member
    • Topics: 16
    • Replies: 220
    • ☆☆☆

    Ans) $215,000

    Workings:
    Using the given sales & profit figures, we can calculate CM.
    CM = 200,000 x 40% = $80,000

    Since CM = FC + Profit,
    so, CM – Profit = FC
    80,000 – 10,000 = $70,000 = FC

    For a target profit of $16,000,

    CM = FC + Target Profit
    CM = 70,000 + 16,000
    CM = 86,000

    For Sales Revenue, we’ll simply divide CM by its %.
    Sales = 86,000/40%
    Sales = $215,000

    Hope it helped you.
    If you have any query, feel free to ask.

    July 23, 2016 at 8:47 pm #328551
    iyamu
    Participant
    • Topics: 286
    • Replies: 171
    • ☆☆☆

    Sir, what is CM? going through the note examples are not worked out how them do we get solutions? Also, is MA2 lectures not available?

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