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3. Cost-Volume-Profit AnalysisPowerPoint Presentation

3. Cost-Volume-Profit Analysis

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3. Cost-Volume-Profit Analysis

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3. Cost-Volume-Profit Analysis

Hanif Kanjer

Dean, Rustomjee Business School

- Contribution Margin
- Contribution margin per unit
- Contribution margin %
- Profit-Volume Graphs
- Break-even Analysis
- Margin of Safety
- Sensitivity Analysis
- Solved Examples

- E.g. 3-20, Pg 112
Contribution & Operating Income

Break-even point in Revenues

Break-even point in units

The Doral Company manufactures and sells pens.

Sales: 5,000,000 units @ $0.50per unit.

Fixed costs $900,000/yr

Variable costs are $0.30/yr

E.g. 3-20, Pg 112

E.g. 3-20, Pg 112

E.g. 3-19, Page 112,

E.g. 3-19, Page 112

Break-even Point

E.g. 3-21, Pg 112

Sanborn Motors is a small-car dealership.Sells a car for $29,000 per monthPurchases the car for $25,000 per monthPays $65,000 in rent & utilities, $75,000 for sales people’s salaries.Sales people are paid a commission of $600 per car they sell.Sanborn spends $12,000 each month for local advertising.Its tax rate is 25%Find the Break-even point

Break-even Point and income taxes

E.g. 3-21, Pg 112

To achieve a target monthly net income of $69,000, how many cars should be sold?

Total Amount

1,027,000

302.06

935,000

92,000

23,000

69,000

302.06