1. 1 Chapter 2 Introduction to Cost Behavior and Cost-Volume Relationship

2. 2 Objective 1 Explain how cost drivers affect cost behavior

3. 3 are factors or activities that have a direct cause-effect relationship to a cost. For example, production volume has a direct effect on the total cost of raw material used and can be said to "drive" that cost. In addition, volume could be used as a valid "driver" of raw material cost. are factors or activities that have a direct cause-effect relationship to a cost. For example, production volume has a direct effect on the total cost of raw material used and can be said to "drive" that cost. In addition, volume could be used as a valid "driver" of raw material cost. Cost Drivers

4. 4 In most situations, the cause-effect relationship is less clear, since costs are commonly caused by multiple factors. For example, quality control costs are affected by a variety of factors, such as production volume, quality of material used, skill level of workers, and level of automation. Any of these factors could be chosen as a cost driver if a reasonable amount of confidence exists as to the factor's ability to correlate with cost changes. A major task in specifying cost behavior is to identify the cost drivers-that is to determine the activities that cause costs to be incurred.

5. 5 This chapter focuses on volume- related cost drivers. Volume-related cost drivers include:   The number of orders processed,   Production volume in a production department,   The hours of labor worked in an assembly department,   Sales in a retail business. Of course, when only one product is being produced the units of production is the most obvious volume related cost driver for production-related costs.

6. 6 Objective 2 Show how changes in cost- driver activity levels affect variable and fixed costs

7. 7 Costs are classified as variable or fixed depending on how much they change as the level of a particular cost driver changes. A variable cost is a cost that changes in direct proportion to changes in the cost driver. A fixed cost is not immediately affected by changes in the cost driver. Variable costs vary in direct proportion to the volume of activity, that is doubling the level of activity will double the total variable costs. Consequently, total variable cost is constant. Figure 2.1 illustrates a variable cost where the variable cost per unit of activity is L.E. 10 Comparison of variable and fixed costs

8. 8 Figure 2-1 Variable Costs A : Total Variable Cost B : Unit Variable Cost 5000 ------------------------------ 4000 3000 ------------------- -------- 100 200 300 400 500 Activity level (Units of output) Total Variable Cost 2000 1000 L.E 10 Activity level (Units of output) 100 200 300 400 500 Unit Variable Cost

9. 9 Examples of variable manufacturing costs include direct labor, direct material and power. These costs are assumed to fluctuate directly in proportion to operating activity within a certain range of activity. Examples of non-manufacturing variable costs include sales commissions, which fluctuate with sales value. Suppose for example, a firm pays its sales persons a sales commission. As sales value increases, the commission paid will increase proportionally. If a firm pays a commission of 10 % of sales value. The total commission paid will be as follows:

10. 10 Commission paid (L.E) Sales value (L.E) Month 100001000001 120001200002 150001500003 Note that variable cost (commission paid) varies proportionally with the level of activity (as expressed in sales value) where as the unit variable cost remains unchanged at 10 PT. per L.E. 1 of sales. Fixed costs remain constant over wide ranges of activity for a specified time period. Examples of fixed costs include supervisors salaries, straight-line depreciation, and insurance. Figure 2-2 illustrates fixed cost.

11. 11 You will see that the total fixed costs are constant for all levels of activity (within relevant range), whereas unit fixed costs decrease proportionally with the level of activity. for example, if the total of the fixed costs L.E. 5000 for a month, the fixed costs per unit will be as follows: Fixed cost per unit (L.E)Units produced 50001 50010 50100 51000

12. 12 Figure 2-2 Fixed Costs A : Total Fixed Costs B : Unit Fixed Costs 100 200 300 400 500 Activity level Total Fixed Cost (L.E) Activity level 100 200 300 400 500 Unit Fixed Cost (L.E)

13. 13 Note carefully from these examples that the “ variable ” or “ fixed ” characteristic of a cost relates to its total amount and not to its per unit amount. The following table summarizes these relationships. If cost – driver activity level increases (or decreases) cost per unitTotal costType of cost decrease (or increase) No change Fixed costs No change Increases (or decrease) Variable costs

14. 14 When predicting costs, two rules of thumb are useful : 1.Think of fixed costs as a total. Total fixed costs remain unchanged regardless of changes in cost-driver activity. 2.Think of variable costs on a per-unit basis. The per-unit variable cost remains unchanged regardless of changes in cost- driver activity.

15. 15 is a range of activity over which a variable cost per unit remains constant or a fixed cost remains fixed in total. In other words, a relevant range is a range of activity in which costs behave in accordance with the way they have been define. The relevant range is generally the normal operating range for a company. In addition remember that even within the relevant range a fixed cost remains fixed only over a given period of time-usually the budget period. Relevant Range

16. 16 Cost – volume-profit Analysis   Cost-volume-profit (CVP) analysis means the study of the effects of output volume on revenue (sales), expenses (costs), and net income (net profit)   The study of cost-volume-profit relationship is often called break-even analysis, This term is misleading, because finding the break-even point is often just the first step in a planning decision.   To apply CVP analysis, the major simplification-in this chapter- is to classify costs as either variable or fixed with respect to a single measure of the volume of output activity.

17. 17 Objective 3 Calculate break-even sales volume in total pounds and total units

18. 18 Break-Even Point – Contribution Margin and Equation Techniques. is the level of sales at which revenue equal expenses and net income is zero. Break-even point Contribution-Margin Technique Contribution margin or marginal income is the sales price minus the variable production, selling and administrative costs per unit.

19. 19 Break-even point (units) = Break-even point (L.E) = Break-even point (units) X sales price Note: Contribution margin per unit is constant because revenue and variable cost have been defined as remaining constant per unit.

20. 20 Contribution-margin percentage (or ratio) = Contribution margin per unit Sales price per unit Variable-cost percentage (or ratio) = Variable cost per unit Sales price per unit Note: Contribution-margin percentage + variable- costpercentage = 100 % Contribution-margin percentage + variable- cost percentage = 100 %

21. 21 Break-even point (L.E) Break-even point (L.E) = Using the contribution-margin percentage, you can compute the break-even volume in pounds (L.E.) without determining the break-even point in units. Data needed to compute break- even point and perform CVP analysis are given in the income statement in Exhibit 2-3 for XYZ company. Example:

22. 22 Exhibit 2-3 XYZ Company Income Statement For the Year Ended Dec,31,‏1997 PercentPer Unit L.E Total L.E 100 % 1001,200,000Sales (12000 units) Variable costs: 30%30360,000 Production 10%10120,000 Selling 40%40480,000 Total variable cost 60%60720,000Contribution margin Fixed costs: 250,000 Production 50,000 Selling administrative 300,000Total fixed costs 420,000Net income

23. 23 Break-even point & contribution margin technique Contribution margin per unit = L.E. 100 – L.E 40 = L.E. 60 Break-even point (pounds) = 5000(units) X L.E 100 (selling price) = L.E. 500,000Or = L.E. 300000 Fixed costs / 60% Contribution margin percent = L.E. 500,000 Contribution margin percentage = 60% Break-even point (units) = L.E 300000 L.E 60 = 5000 units

24. 24 The income statement at the break-even point is PercentPer Unit L.E Total L.E 100 % 100500,000 Sales (5000 units) Variable costs: 30%30150,000 Production Production 10%1050,000 Selling Selling 40%40200,000 Total variable cost 60%60300,000 Contribution margin Fixed costs: 250,000 Production Production 50,000 Selling administrative Selling administrative 300,000 Total fixed costs 0 Net income

25. 25 Equation Technique Any income statement can be expressed in equation form, as follows : Sales – Variable expenses – Fixed expenses = net income That is, (Unit sales Price X number of units) – (Unit Variable Cost X number of units ) – Fixed costs = net income

26. 26 At the break-even point net income is zero : Sales – Variable expenses – Fixed expense = 0 Let X = number of unit to be sold to break- even. Then for XYZ company example. L.E. 100 X - L.E 40 X - L.E 300,000 = 0 L.E. 60 X = L.E. 300,000 L.E. 60 X = L.E. 300,000 X = L.E. 300,000  L.E. 6 X = L.E. 300,000  L.E. 6 X = 5000 units X = 5000 units Break-even point in pounds (L.E) = 5000 units X unit sales price = 5000 X L.E. 100 = L.E. 500,000

27. 27 You can also solve the equation for sales pounds without computing the unit break-even point by using the relationship of variable costs and profits as a percentage of sales : Variable-cost percentage = Variable cost per unit (or ratio ) Sales price per unit = L.E. 40 L.E. 100 = 40% or 0.4 Let S = Sales in pounds (L.E.) needed to break-even. Then S - 0.4 S - L.E. 300,000 = 0 0.6 S = L.E.300,000 S = L.E. 300,000  0.6 = L.E. 500,000

28. 28 General shortcut break-even formulas: Break-even volume= Fixed expenses In units Contribution margin per unit Break-even volume = Fixed expenses In pounds (L.E.)Contribution margin ratio

29. 29 Objective 4 Construct a cost - volume- profit graph

30. 30 Break – even chart-Graphical techniques is a graph that depicts the relationship among revenues, variable costs, fixed costs and profits (or losses). The break-even point is located at the point where the total cost and total revenue lines cross. There are two approaches to prepare break- even charts : A break- even chart The traditional approach the contemporary approach The third graphical presentation, the profit-volume graph, is closely related to the break- even chart

31. 31 The traditional approach focuses on the relationships among revenues, costs, and profits (Losses). This approach does not show contribution margin. A traditional break – even Chart for XYZ company is prepared in the following manner: Traditional Approach 2) Plot sales volume, select a convenient sales volume (within the relevant range), say, 15,000 units, and plot point A for total sales at that volume : 15,000 X L.E 100 = L.E. 1,500,000. Draw the revenue( i.e. sales) Line from point A to the origin, point 0 1) Draw the axes. The horizontal axis is the sales volume, and the vertical axis is pounds of cost and revenue.

32. 32 4) Plot variable expenses. Determine the variable portion of expenses at a convenient level of activity: 15,000 X L.E. 40 = L.E 600,000. Add this to the fixed expenses : L.E 600,000 + L.E 300,000 = L.E. 900,000. Plot point C for 15,000 units and L.E. 900,000. Then draw a line between point C and point B. This is the total expenses line. 3) Plot fixed expenses. Draw a horizontal Line intersecting the vertical axis at L.E 300,000, point B 5) Locate the Break- even point is where the total expenses line crosses the sales line, 5000 units or L.E. 500,000, namely where total sales revenues exactly equal total costs, point D. Exhibit 2-4 is a graph of the cost – volume- profit relationship in our XYZ company example.

33. 33 Exhibit 2-4 Cost – volume-profit Graph Volume in thousands of units

34. 34 The contribution margin provided by each level of sales volume is not apparent on the preceding traditional break-even chart. Since contribution margin is so important in CVP analysis, another graphic approach can be used. The contemporary graphic approach specifically presents CM in the break – even chart. The preparation of this chart is detailed in the following steps: Contemporary Approach – contribution Graph

35. 35 Step (1) plot the variable cost firstly: The revenue line is plotted next, and the contribution margin area is indicated. Volume in thousands of units

36. 36 Step (2) Total cost is graphed by adding a line parallel to the total variable cost Line. The distance between the total cost line and the variable cost line is the amount of fixed cost. The break-even point is located where the revenue and total cost lines intersect.

37. 37 The contemporary graphic approach allows the following important observations to be made:   Contribution margin is created by the excess of revenues over variable costs.   Total contribution margin is always equal to total fixed cost plus profit or minus loss.   Before profits can be generated, contribution margin must exceed fixed costs.

38. 38 The profit-volume graph reflects the amount of profit or loss associated with each level of sales. The horizontal axis on the PV graph represents sales volume. The vertical axis represents profits and losses. Amounts above the horizontal axis are positive and represent profits; amounts below the horizontal axis are negative and represent losses. Profit-Volume (PV) Graph

39. 39 Two points are located on the graph: If sales are zero, the loss will be the amount of the fixed costs. To plot the other point, select any other level of sales volume; say 15,000 units ( in our XYZ example). Determine profit (or loss) for this level, {15,000 units X L.E. 60 (CM)} - L.E. 300,000 (Fixed costs) = L.E.900,000 - L.E. 300,000 = L.E. 600,000 So, the two points are Profit (or loss)Sales Volume L.E. 300,000 (loss) 0 L.E. 600,000 (profit) 15,000

40. 40 The last step in preparing the PV graph is to draw a profit line that passes between and extends through the two located points. Using this Line, the amount of profit or loss for any sales volume can be read from the vertical axis. The profit Line is really a contribution margin Line, and the slope of the line is determined by the unit contribution margin. The Line shows that no profit is earned until the contribution margin covers the fixed costs.

41. 41 The PV graph for XYZ Company is shown below:

42. 42 With each unit sold, a contribution of L.E 60 is obtained toward the fixed costs, and the break-even point is at 5,000 units when the total contribution (5000 units X L.E. 60 = L.E 300,000) exactly equal the total of the fixed costs. With each additional unit sold beyond 5000 units a surplus of L.E.60 per unit is obtained. If 12,000 units are sold, the profit will be L.E. 420,000(7000 units at L.E. 60 contribution).

43. 43 Changes in fixed costs causes changes in the break-even point. For example, if fixed costs increase from 300,000 to 360,000 (in our example), what would be the break-even point in units and in pounds? Break-even point = Fixed expenses (in units) Contribution margin per unit (in units) Contribution margin per unit = L.E. 360,000 = L.E. 360,000 L.E 60 L.E 60 = 6000 units = 6000 units Changes in fixed costs

44. 44 Break-even point = Fixed expenses (in pounds) Contribution margin ratio = L.E.360,000 0.6 = L.E. 600,000 Note that a one-fifth increase in fixed expenses altered the break-even point by one- fifth: from 5,000 units to 6,000 units, and from L.E 500,000 to L.E 600,000. This type of relationship always exists if every thing else remains constant. The P/V graph is shown below:

45. 45

46. 46 Changes in variable costs also cause the break – even point to shift. Companies can reduce their break- even points by increasing their contribution margins per unit of product through either increases in sales prices or decreases in unit variable costs, or both. For example, assume that (1) the variable expenses increase from L.E. 40 per unit to L.E. 50. (1) the variable expenses increase from L.E. 40 per unit to L.E. 50. (2) the selling price falls from L.E. 100 to L.E. 80 per unit, and the original variable costs per unit are unchanged, Find the break-even point in units and pounds. Find the break-even point in units and pounds. Changes in Contribution margin per Unit

47. 47 1.Unit contribution margin = L.E 100 – L.E. 50 = L.E. 50 Contribution margin ratio = L.E. 50 Contribution margin ratio = L.E. 50 L.E. 100 L.E. 100 = 0.5 = 0.5 The original fixed expenses of L.E. 300,000 would be unaffected, but the denominators would change from those previously used. Thus Break-even point = L.E. 300,000 (in units) L.E. 50 = 6000 units Break-even point = L.E. 300,000 ( in pounds) 0.5 = L.E. 600,000

48. 48 2.U nit contribution margin = L.E. 80 – L.E. 40 = L.E. 40 Contribution margin ratio = L.E. 40 L.E. 80 = 0.5 Break-even point = L.E. 300,000 = 7500 (in units) L.E. 40 Units Break-even point = L.E. 300,000 = 0.5 (in pounds) L.E. 600,000

49. 49 The P/V graphs for the above two cases compared with the original case of XYZ company is shown below : Case 1

50. 50 Objective 5 Calculate sales volume in total units and total pounds to reach a target (a planned) profit.

51. 51 Using Cost – Volume-profit Analysis Managers can also use CVP analysis to determine the total sales,in units and pounds, needed to reach a target profit. Managers can also use CVP analysis to determine the total sales,in units and pounds, needed to reach a target profit. Profit may be stated as either a fixed or a variable amount. Profit may be stated as either a fixed or a variable amount.

52. 52 1. Fixed amount of profit. The method for computing the target or desired sales volume in units and pounds is the same as was used in break-even computation. Target sales volume in units = Fixed expenses + target net income Contribution margin per unit Target sales volume in pounds = Fixed expenses + target net income Contribution margin ratio

53. 53 For example. in our XYZ company, suppose that the target net income is L.E. 120,000 find the target sales volume in units and pounds : Target sales volume in units = L.E. 300,000 + L.E. 120,000 L.E. 60 = 7,000 units Target sales volume in pounds = L.E. 300,000 + L.E. 120,000 0.6 = L.E. 700,000

54. 54 Another way of getting the same answer is to adopt an incremental approach. The term incremental refers to to the change in total results (such as revenues, expenses, or income) under a new condition in comparison with some given or known condition. In this instance the known condition is assumed to be the 5,000- unit break-even point. All expenses would be recovered at that volume. Therefore the change or increment in net income for every unit beyond 5000 would be equal to the contribution margin of L.E. 60. After the break-even point is reached, each pound of contribution margin is a pound of profit. If L.E. 120,000 were the target net profit, the target sales volume must exceed the break-even volume by L.E. 120,000 ÷ L.E. 60 = 2000 units; it would be therefore 5,000 + 2,000 = 7,000 units.

55. 55 To find the answer in terms of pounds with the incremental approach, every sales pound after the break-even point of L.E. 500,000 contributes L.E. 0.6 to net profit. Sales in pounds must exceed the break- even volume by L.E. 120,000 ÷ 0.6 = L.E. 200,000 to produce a net profit of L.E. 120,000; Thus the sales in pounds would be L.E. 500,000 + L.E. 200,000 = L.E. 700,000. The following table summarizes these computations: New condition IncrementBreak-even Point7,0002,0005,000 Volume in units 700,000200,000500,000 Sales Sales 280,00080,000200,000 Variable expenses 420,000120,000300,000 Contribution margin 300,000-300,000 Fixed expenses L.E.120,000120,0000 Net income

56. 56 2. 2.Variable amount of profit Managers may wish to state profits as a variable amount so that as units sold or sales in pounds increase, profit will increase at a constant rate. Profit on a variable basis can be stated either as a percent of revenues or as a per-unit profit. The CVP formula must be adjusted to recognize that profit (p) is related to volume of activity. The adjusted CVP formula for computing the necessary unit volume of sales to earn a specified variable amount of profit per unit is as follows:

57. 57 R (x) – VC (x) – FC = PPU (x) Where: R = selling price per unit R = selling price per unit x = number of units x = number of units R(x) = total revenue R(x) = total revenue VC = Variable cost per unit VC = Variable cost per unit VC(x) = total Variable cost VC(x) = total Variable cost FC = total fixed cost FC = total fixed cost PPU = Profit per unit PPU = Profit per unit

58. 58 Rearranging the above formula gives the following: R(x) – VC(X) – PPU (x) = FC X (R – VC- PPU ) = FC X (CM – PPU ) = FC Where CM = contribution margin per unit Solving for x (volume ) gives the following: X =FC ( R – VC – PPU )

59. 59 The variable profit is treated in the CVP formula as if it were an additional variable cost to be covered. This treatment adjusts the original contribution margin and contribution margin ratio. When setting the desired profit as a percentage of selling price (or sales revenue), that percentage cannot exceed the contribution margin ratio. If it does, an infeasible problem is created, since the variable cost percentage plus the desired profit percentage would exceed 100 percent of selling price such a condition cannot occur.

60. 60 Assume that the president of XYZ company wants to know what level of sales (in units and pounds ) would be required to earn a 30% profit on sales. The following calculations provide answers to this questions: In Units Profit desired = 30 % of sales revenues Profit per unit (PPU) =,30 x L.E. 100 = 30 Target sales volume in units (x) = FC (R – VC – PPU) (R – VC – PPU) = L.E 300,000 = L.E 300,000 ( L.E. 100 – L.E. 40 – L.E. 30) ( L.E. 100 – L.E. 40 – L.E. 30) = 10,000 Units = 10,000 Units

61. 61 In Sales Pounds The following relationships exist PercentPer unit 100 %L.E. 100Selling price (40%)L.E. 40Variable cost (30%)L.E. 30Variable profit 30 %L.E. 30"Adjusted" Contribution Margin Target sales volume (in pounds) = FC contribution Margin ratio – profit desired ratio = FC "Adjusted" CM ratio = L.E 300,000 0.3 = L.E. 1,000,000

62. 62 The income statement for this volume of activity is shown below : PercentPer Unit L.E Total L.E 100 % 1001,000,000 Sales (10,000 Units) Variable costs: 30%30300,000 Production Production 10%10100,000 Selling Selling 40%40400,000 Total variable cost 60%60600,000 Contribution margin Fixed costs 250,000 Production Production 50,000 Selling administrative 300,000 Total fixed costs 30%300,000 Net in come

63. 63 Margin of Safety The margin of safety is defined as the excess of the budgeted or actual sales of a company over the company's break-even point. The margin of safety can be expressed as units, pounds, or a percentage. The following formulas are applicable Margin of safety in units = Planned ( or actual ) units – Break-even units Margin of safety in pounds = Planned (or actual) sales L.E – Break- even sales L.E Margin of safety % = Margin of safety in units or L.E Planned (or actual ) sales in units or L.E.

64. 64 Margin of safety is one direct uses of CVP analysis, It shows how far sales can fall below the planned (or actual ) Level before losses occur. The break-even point for XYZ company is 5,000 units or L.E. 500,000 of sales. The income statement for the company in Exhibit 2-3 showed actual sales for the year ended December,31,97, of 12,000 units,or L.E. 1,200,000. The margin of safety for XYZ is computed as shown below: In units = 12,000 (actual ) – 5000 BEP = 7,000 units In sales L.E = L.E. 1,200,000 (actual) – L.E. 500,000 (BEP) = L.E. 700,000 Percentage = 7,000 ÷ 12,000 or L.E. 700,000 ÷ L.E 1,200,000 = 58% The margin of safety for XYZ is quite high, since it is operating far a above its break-even point.

65. 65 The margin of safety calculation allows management to assess possible risks; by determining how close to a danger level the company is operating. The lower the margin of safety, the more carefully management must watch sales figures and control costs so as not to generate a net loss.

66. 66 Objective 6 Distinguish between contribution margin and gross margin

67. 67 Contribution margin & Gross margin (Gross profit) is the excess of sales over the cost of goods sold (that is, the cost of the merchandise that is acquired or manufactured and then sold ) Gross margin is sales less all variable costs. The variable costs will include part of the cost of goods sold and also part of the other operating expenses Contribution margin

68. 68 Example: Problem 2- 42 P,71 General Mills produces and sells food products and backing products. A condensed 1994 income statement follows ( in millions): 8,517 Sales L.E 4,458 Cost of goods sold 4,059 Gross margin 3,306 Other operating expenses 753 Operating income

69. 69 Assume that L.E. 960 million of the cost of goods sold is a fixed cost representing depreciation and other producing costs that does not change with the volume Of production. In addition L.E 2,120 million of the other operating expenses is fixed Compute the total contribution margin for 1994 and the contribution margin percentage.

70. 70 Solution Variable costs = L.E 4,458 Cost of goods sold 960- Fixed production costs 3,498 1,186+Variable other operating Expenses (L.E 3,306_ L.E 2,2120 ) 4,684 Fixed costs = L.E 960 Production costs 2,120+ Other operating expenses 3,080

71. 71 Condensed Income Statement For 1994 8,517 Sales L.E 4,684 Variable costs 3,833 Contribution margin 3,080 Fixed costs 753 Operating income Contribution margin percentage = L.E. 3,833 ÷ L.E. 8,517 = 45%

72. 72 Objective 7 Identify the limiting assumptions that underlie cost- volume-profit analysis

73. 73 Underlying Assumptions of CVP Analysis The cost – volume-profit analysis is a useful planning tool that can provide information on the impact on profits when changes are made in costs or in sales levels. Several important assumptions are made in CVP analysis. They are necessary, but they limit the accuracy of the results. Some of these assumptions follow: 1) Expenses may be classified into variable and fixed categories. Total variable expenses vary directly with activity level. (Within the relevant range)

74. 74 3)Efficiency and productivity will be unchanged (Labor productivity, production technology and market conditions will not change). 2) Selling prices do not change with production and sales over the relevant range ( a constant selling price per unit ) 5) The difference in inventory level at the beginning and at the end of a period is insignificant (sales = production ) 4) Sales mix will be constant. The sales mix is the relative proportions or combinations of quantities of products that constitute total sales.

75. 75 Solution strategies Most CVP problems are solvable by using a numerator, denominator approach. All numerators and denominators and the type of problem each relates to are listed below : denominatorNumeratorProblem situationCMFC BEP in units CM% FC BEP in pounds CMFC Target sales with Lump-sum profit in units CM%FC Target sales with Lump-sum profit in pounds CM- PPU FC Target sales with Variable Profit in units CM% - PPU% FC Target sales with Variable Profit in pounds

76. 76 Where: FC = Fixed cost. CM = Contribution margin per unit. CM% = Contribution margin percentage. P = Total planned profit. PPU = Profit per unit. PPU% = Profit per unit percentage ( profit desired ratio ). ( profit desired ratio ).

77. 77 T h a n k y o u