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3.16 Contribution

This document contains information about contribution margin analysis for several companies. It includes calculations of contribution, fixed costs, break-even points, operating income, and the impact of changes in variables. The key details are: 1) Contribution margin, fixed costs, operating income, and break-even point are calculated for different scenarios involving changes in variable and fixed costs. 2) Multiple products/services are analyzed including their sales, costs, contribution, break-even units, and the impact of changes in variables like price, costs, and fixed costs. 3) The impact of sales below or above break-even on operating income and losses is demonstrated. Different alternatives are evaluated to determine the preferred option.

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Vishal Sairam
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59 views8 pages

3.16 Contribution

This document contains information about contribution margin analysis for several companies. It includes calculations of contribution, fixed costs, break-even points, operating income, and the impact of changes in variables. The key details are: 1) Contribution margin, fixed costs, operating income, and break-even point are calculated for different scenarios involving changes in variable and fixed costs. 2) Multiple products/services are analyzed including their sales, costs, contribution, break-even units, and the impact of changes in variables like price, costs, and fixed costs. 3) The impact of sales below or above break-even on operating income and losses is demonstrated. Different alternatives are evaluated to determine the preferred option.

Uploaded by

Vishal Sairam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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3.

16 Contribution 40 Unit Sales 20000


Fixed Costs 200,000 SP pu 100
VC pu 60

a Contribution Margin 800,000


40.00%

Operating Income Contribution 800,000


FC 200,000
Operating Income 600,000

b New VC pu 30
New Contribution pu 70
New Fixed Costs 700,000

New Contribution
Margin 70.00%
Contribution 1,400,000
New Operating Income 700,000

Can accept the accept


the propsal as the OI
c inproves by 100000.
3.19 Unit Sales
SP pu 3000
VC pu 2100
Sales Commission pu 150
Contribution pu 750
Fixed Manuf. Cost 12000000
Fixed Mark. Cost 3000000
Tax rate 0.25

1 BEP 20000

2a Units for TOI 45L 26000

2b Units for NOI 45L

Operating Income for 45L Net Income 6000000

Units 28000

3a New Contribution pu 825

Units 25454.55

3b New SP pu 3250

New Sales Comm. pu 162.5

New Contribution pu 987.5

Units 21265.82

3c New VC pu 2300
New Manuf. Fixed Costs 4800000

New Contribution pu 550

Units 25090.9
3.20 BEP Revenues 1500000
Fixed Costs 720000

1 At breakeven Contribution=Fixed Costs


Contribution margin 48.00%

2 VC pu 13

SP pu (SP -13)/SP=48%
.52SP = 13
SP pu 25

3 Units sold 90000

MOS Sales units - BEP units


Contr pu 12
BEP in units 60000

MOS 30000
MOS $$ 750000

4 Loss when sales are < 30000 units


3.21 Sales price per concert 45000
Marketing VC per concert 10000
Guest fees VC per concert 18000

Art Director fees per year 330000


Lease payments @40000 pm 480000
Donations expected 300000
Fixed Costs 510000

1 BEP 30.00

2 Mark director cost 255000


Total FC 765000

BEP 45

Operating Income:

Contribution 697000
FC 765000
Operating Income -68000

3 Addirional grant 170000


Total FC 595000

BEP 35
3.22 X Y Z
Contribution margin 15 10 5
Units forecasted 10000 50000 40000
Ratio of Units at breakeven 1 5 4

1 Break even Contribution=Fixed Cost

15x 50x 20x


85x=510000 fixed costs
x= 6000

Breakeven Units 0 0 0

2 Total Contribution 150,000 500,000 200,000


Total Contribution 850,000

Operating Income 340,000

3 X Y Z
Units forecasted 10000 40000 50000
1 4 5

15x 40x 25x


BEP 80x=510000
6375

Breakeven units 0 0 0
3.23 Purchase VC pu 60
SP pu 90
Contribution pu 30

Fixed costs ₹ 480,000


Per order shipment costs 120

1.a Total contribution 1200000


FC ₹ 480,000
Shipment costs 120000
Operating Income ₹ 600,000

1.b Total contribution 1200000


FC ₹ 480,000
Shipment costs 96000
Operating Income ₹ 624,000

2 Shipment costs ₹ 60,000


FC ₹ 480,000
total fixed costs ₹ 540,000

Break even units 18,000

Break even units depend


on the shipment costs
that vary with the no. of
3 shipments
3.26
1 Revised Income Statement for Contribution

Sales/Revenue ₹ 1,000,000
Variable Manufacturing Costs ₹ 550,000
Variable Marketing Costs ₹ 50,000
Contribution ₹ 400,000

Fixed Manufacturing Costs ₹ 200,000


Fixed Marketing & Admin Costs ₹ 100,000

Operating Income ₹ 100,000

2 Contribution Margin % 40%

Sales price pu ₹ 100


Contribution pu ₹ 40

BEP In Units 7500

BEP In Revenue ₹ 750,000


BEP In Revenue ₹ 750,000

3 Units sold 10,000

Margin of Safety(MOS) 2,500

4 Sales units 8000


Sales revenue ₹ 800,000

Contribution ₹ 320,000
Fixed Costs ₹ 300,000

Operating Income ₹ 20,000


Tax ₹ 6,000

Net Income ₹ 14,000


3.30
1 Current Charge per page ₹ 1.50
VC per page(.4+.5) ₹ 0.90
Contribution per page ₹ 0.60

Fixed Leasing Costs ₹ 12,000

BEP in units 20,000

New Agreement:

Commission per page 0.4

Charge per page ₹ 1.50


VC per page(.4+.5) + .4 ₹ 1.30
Contribution per page ₹ 0.20

New BEP in units ₹ -


0 Fixed Costs as leasing costs are factored in as Comission per page

2 Under fixed leasing .6x-12000


Under commission based model .2x

Point of indifference between the alternatives .4x=12000


30,000

for upto 30,000 pages the company prefers Commission based model
for pages>30,000, the company would prefer fixed leasing model

For example at 10,000 units

profit under fixed leasing -6000


profit under commission based model 2000

The commission model is preferable

For example at 40,000 units

profit under fixed leasing 12000


profit under commission based model 8000

Fixed leasing model is preferable

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