# 3. Cost-Volume-Profit Analysis - PowerPoint PPT Presentation

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3. Cost-Volume-Profit Analysis. Hanif Kanjer Dean, Rustomjee Business School. Index. 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

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3. Cost-Volume-Profit Analysis

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## 3. Cost-Volume-Profit Analysis

Hanif Kanjer

### Index

• 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

### Delicious Donuts - 1

E.g. 3-19, Page 112,

E.g. 3-19, Page 112

### Delicious Donuts - 2

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