Hafiz muhammad usama javed
Transcript of Hafiz muhammad usama javed
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HAFIZ MUHAMMAD USAMA JAVEDBBA-13-01
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Some Application of CVP Concepts
Per Unit Percent of Sale
Selling price $250 100%
Variable expenses 150 60%
Contribution margin $100 40%
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Change in Fixed Cost and Sales Volume
Acoustic concepts is currently selling 400 speakers per month at $250 per speaker. Total monthly sales is $100,000. The sales manager feels that a $10,000 increase in the monthly advertising budget would be increase increases in monthly sales by $30,000 to a total 520 units. Should the advertising budget be increased? The following table shows the financial impact of the proposed change in the monthly advertising.
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Current Sale Sale with Additional Advertising Budget
Difference Percent of Sale
Sales $100,000 $130,000 $30,000 100%Variable Expenses
60,000 78,000 18,000 60%
Contribution Margin
40,000 52,000 12,000 40%
Fixed Expenses 35,000 45,000 10,000
Net Operating Income
$5000 $7000 $2000
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Alternative solution 1
Expected total contribution margin $130,000*40% CM ratio
%52,000
Present total contribution margin $100,000*40% CM ratio $40,000Incremental contribution margin 12,000Change in fixed expenses:Less incremental advertising expenses 10,000Increased net operating income
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Alternative solution 2
Incremental contribution margin $30,000*40% $12,000Less incremental advertising expenses 10,000Increased net operating income $2000
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Change in Variable Costs and Sales Volume
Expected total contribution margin with higher-quality components:400units*$90 per unit/speaker
$43,200
Present total contribution margin: 400unit/speakers * $100 per unit/per speaker
40,000
Increase in total contribution margin $3200
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Change Fixed Costs, Sales price,and Sales Volume
Expected total contribution margin with lower selling price:600speakers*$80 per speaker
$48,000
Present total contribution margin:400spekers*$100 per speaker
40,000
Incremental contribution margin 8000Change in fixed expenses:Less incremental advertising expenses 15,000Reduction in net operating income $(7000)
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Present 400speakers per month
Expected 600 speakers per month
Total Per unit total Per unit Difference Sales $100,000 $250 $138,000 $230 $38,000Variable expenses
60,000 150 90,000 150 30,000
Contribution margin
40,000 100 48,000 80 8,000
Fixed expenses 35,000 50,000 15,000Net operating income(Loss)
$5000 $(2000) $(7,000)
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Change in Variable Costs, Fixed Costs, and Sales Volume
Expected Total contribution margin with sales staff on commissions: 460 speakers* $85 per speaker
$39,100
Present total contribution margin 400 speakers*$100 per speaker
40,000
Decreases in total contribution margin (900)Change in fixed expenses:Add salaries avoided if a commission is paid 6,000Increases in net operating income $5100
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Present 400 speakers per month
Expected 460 speakers per month Total Per
unitTotal Per unit Differenc
e Sale $100,000 $250 $115,000 $250 $15,000Variable expenses
60,000 150 75,900 165 15,900
Contribution margin
40,000 $100 39,100 $85 900
Fixed expenses
35,000 29,000 (6,000)Net operating income
$5,000 $10,100 $5,100
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Change in Selling price
Variable cost per speaker $150Desired profit per speaker $3,000/150 speakers 20Quoted price per speaker $170