Explore BrainMass

# Break even analysis

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

The Varihary Company manufactures 2 products, Sintax and Gremmer, which sell for \$10 and \$ 15 respectively.

The following Figures apply to the year ended 30 September 2002.

Sintax Gremmer.
Sales \$90 000 \$30 000
Variable costs per unit \$ 6 \$ 12

Fixed costs for the company amounted to \$ 10 000.

(a) Calculate the number of units of Sintax and Gremmer sold during the year ended 30 September 2002.
(b) Calculate the contribution to sales ratio for each product for the year ended 30 September 2002.
(c) Calculate the contribution to sales ratio for the company for the year ended 30 September 2002.
(d) From the following profit/volume chart for the company for the year ended 30 September 2002 determine the break-even point ,the profit or loss at the present sales figure and the profit or loss at sales of \$ 20 000.Indicate clearly whether these are profit or losses.
For the year ended 30 September 2003 the company expects to increase total sales revenue by 10 %, half of the total increase to apply to each product. Unit prices and costs will be unchanged, and fixed costs will remain at \$ 10 000.
(e) Calculate the number of units of Gremmer and Sintax which the company expects to sell during the year ending 30 September 2003.
(f) Calculate the contribution to sales ratio for the company for the year ending 30 September 2003.
(g) Draw a profit Volume chart for the company for year ended 30 September 2003, showing break-even point, and profit or loss at the expected sales figure and at sales of \$6000.

Please see attached for full question.

## SOLUTION This solution is FREE courtesy of BrainMass!

See attached file (at the end of the file I have drawn the graph).

The Varihary Company manufactures 2 products, Sintax and Gremmer, which sell for \$10 and \$ 15 respectively.

The following Figures apply to the year ended 30 September 2002.

Sintax Gremmer.

Sales \$90 000 \$30 000
Variable costs per unit \$ 6 \$ 12

Fixed costs for the company amounted to \$ 10 000.

(a) Calculate the number of units of Sintax and Gremmer sold during the year ended 30 September 2002.

Sintax 90 000/10 = 9000

Gremmer 30 000/15 = 2000

(b) Calculate the contribution to sales ration for each product for the year ended 30 September 2002.

Sintex 10-6 = 4 4/10=40%

Gremmer 15-12= 3 3/15=20%

(c) Calculate the contribution to sales ratio for the company for the year ended 30 September 2002.

Sintex 4/10 =40 % 4*9000=36000

Gremmer 3/15 =20% 3*2000=6000

(d) From the following profit/volume chart for the company for the year ended 30 September 2002 determine the break-even point ,the profit or loss at the present sales figure and the profit or loss at sales of \$ 20 000.Indicate clearly whether these are profit or losses.
For the year ended 30 September 2003 the company expects to increase total sales revenue by 10 %, half of the total increase to apply to each product. Unit prices and costs will be unchanged, and fixed costs will remain at \$ 10 000.

Fixed Costs = \$ 10,000.
Contribution to sale = 35%
At breakeven point to total profit = 0 or 35 %
X breakeven sales 10,000
Or Breakeven sales 10,000/35% =\$ 28571
Profit/loss = Contribution -fixed price
At Current level Profit = 35%*120000-10 000=32000
At 20 000 Sales Contribution = 35%*20 000 =\$ 700
Profit/loss =Contribution-Fixed price =7000-10000 = -3000
Or loss of \$3000

(e) Calculate the number of units of Gremmer and Sintax which the company expects to sell during the year ending 30 September 2003.

Total increase in sales = 10%
Thus increase in sales = 10 %*120 000= 12 000
Half the increase applies to each product. Hence
Sintax sales=90 000 +6000 =96000
Gremmer Sales =30 000 +6000=36000.
No. of units of Sintax = 96000/10 =9600
No of units of Gremmer = 36000/15=2400.

(f) Calculate the contribution to sales ration for the company for the year ending 30 September 2003.

Calculation as in (e) above.

(9600*4+2400*3)/132 000 =0.3454.

(g)Draw a profit Volume chart for the company for year ended 30 September 2003, showing break-even point, and profit or loss at the expected sales figure and at sales of \$6000.

We assume that below the sales level of \$ 120,000 the sales mix is the same as that for 2002 ie 75% of Sintax and 25% of Gremmer

Break even point = 10,000 / 35 % = 28571

Contribution Total Contribution Fixed Cost Profit Contribution %
Total sales Sintax Gremmer Sintax @ Gremmer @
40% 20%
6,000 4,500 1,500 1,800 300 2,100 10,000 -7,900 35.00%
28,571 21,428 7,143 8,571 1,429 10,000 10,000 0 35.00%
120,000 90,000 30,000 36,000 6,000 42,000 10,000 32,000 35.00%
132,000 96,000 36,000 38,400 7,200 45,600 10,000 35,600 34.55%

Break even point
Profit at 132,000 level
Loss at 6000 level

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!