Page 63 - P1 Integrated Workbook STUDENT 2018
P. 63
Break-even analysis
Budgeted profit
Profit = contribution – fixed costs
Contribution = contribution per unit × no. of units sold
Contribution = $48 × 2,200 = $105,600
Profit = $105,600 – $24,000 = $81,600
Alternatively:
Formula: MOS in units × contribution per unit
= 1,700 × $48 = $81,600
Target profit
Units to achieve target profit =
fixed costs + target profit/contribution per unit
= ($24,000 + $96,000)/$48 = 2,500 units
Alternatively: revenue to achieve target profit =
Fixed costs + target profit/C/s ratio
= ($24,000 + $96,000)/0.4 = $300,000
Illustrations and further practice
Now try example 1 from Chapter 5.
59
