1. BUSINESS MATHEMATICS
&
STATISTICS

2. LECTURE 21 Review Lecture 20
Perform linear cost-volume profit and break-even analysis.
Using the contribution margin approach

3. Units x = FC / CM = 8640/20 = 432 Units
Scenario 1
CM = S – VC = = 20 Rs.
CR = CM/S * 100% = Rs. 20/50 * 100 =40%
Break Even Point:
Units x = FC / CM = 8640/20 = 432 Units
In Rs. x = (FC / CM)* S :
(Rs. 8640/Rs.20)* Rs.50 = Rs.21,600
BEPin units/ PC*100
= 432/ 900*100 = 48% of Capacity

4. Scenario 2
The Lighting Division of A Lighting Fitting Manufacturer plans to introduce a new street light based on the following accounting information:
FC = Rs VC = Rs S= Rs.185 Capacity = 320 units
Calculate the breakeven point (BEP)
…in units
…in rupees
…as a percent of capacity

5. FC = Rs.3,136 VC = Rs.157. S= Rs.185 Capacity = 320 units
Scenario 2
FC = Rs.3,136 VC = Rs S= Rs.185 Capacity = 320 units
Break Even Point
…in units
= FC / CM
S – VC = CM
Rs.185 – 157 = Rs.28
= Rs.3136/28 = 112 Units

6. FC = Rs.3,136 VC = Rs.157. S= Rs.185 Capacity = 320 units
Scenario 2
FC = Rs.3,136 VC = Rs S= Rs.185 Capacity = 320 units
Break Even Point
…in Rupees
= (FC / CM)* S
= (3136/28) * 185 = Rs.

7. Scenario 2 FC = Rs.3,136 VC = Rs.157. S= Rs.185 Capacity = 320 units
Break Even Point
…as a percent of capacity
= BEP(in units)/PC*100
= 112/320 * 100
= 35% of Capacity

8. Scenario 2 -1 FC = Rs.3136 VC = Rs.157. S= Rs.185 Capacity = 320 units
Determine the BEP as a % of capacity if FC are reduced to Rs.2688.
Formula: = BEP(in units)/PC*100
Step 1… Find CM
Step 2… Find BEP in units
Step 3… Find % of Capacity

9. Step 3… Find % of Capacity
Scenario 2 -1
Step 1… Find CM
S = 185
VC =
CM Rs. 28
Step 2… Find BEP in units
= FC/CM
= Rs. 2688/ Rs.28
= 96 Units
Step 3… Find % of Capacity
=BEPin units /PC*100
= 96/320*100
= 30% of Capacity

10. FC= Rs.3136 VC = Rs.157 S= Rs.185 Capacity =
Scenario 2 -2
FC= Rs VC = Rs.157 S= Rs Capacity =
320 units
VC =S*80% = Rs.148
Determine the BEP as a % of capacity if FC are increased to Rs.4588, and VC reduced to 80% of S.

11. Step 3… Find % of Capacity
Scenario 2 -2
= BEP(in units)/PC*100
Step 1… Find CM
S = 185
VC = -148
CM = Rs. 37
Step 2… Find BEP in units
= FC/CM
= Rs / Rs. 37
= 124 Units
Step 3… Find % of Capacity
=BEPin units /PC*100
= 124/320*100
= 39% of Capacity

12. Scenario 2 -3 FC = Rs. 3136 VC = Rs.157 S= Rs.185 Capacity = 320 units
Determine the BEP as a % of capacity if S is reduced to Rs.171.

13. Step 3… Find % of Capacity
Scenario 2-3
= BEP(in units)/PC*100
Step 1… Find CM
S = 171
VC = -157
CM = Rs. 14
Step 2… Find BEP in units
= FC/CM
= Rs. 3136/ Rs. 14
= 224 Units
Step 3… Find % of Capacity
=BEPin units /PC*100
= 224/320*100
= 70 % of Capacity

14. BUSINESS MATHEMATICS
&
STATISTICS