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COST VOLUME PROFIT ANALYSIS
Sensitivity Analysis
Selling price per unit: (let selling price per unit = x)
Profit = Sales – variable costs – fixed costs
0 = 15 000x – (450 x 15 000) – 800 000
7 550 000 = 15 000x
x = R503.33
Therefore the SP/unit can decrease by 44.1% (R900 – R503.33 / R900) before a loss is incurred.
Variable cost per unit: (let the variable cost per unit = x)
Profit = Sales – variable costs – fixed costs
0 = (15 000 x 900) – (15 000x) – 800 000
12 700 000 = 15 000x
x = R846.67
Therefore the VC/unit can increase by 88.1% (R846.67 – R450 / R450) before a loss is incurred.
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