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Prepared by:-
Ashish goyal
Ashish pandey
Brijesh gupta
Divy asthana
Cost-Volume-Profit Analysis
Packages Sold
0 1 2 25 40
Revenue $0 $200 $400 $5,000 $8,000
Variable costs 0 120 240 3,000 4,800
Contribution margin 0 80 160 2,000 3,200
Fixed costs 2,000 2,000 2,000 2,000 2,000
Operating income $(2,000) $(1,920) $(1,840) $0 $1,200
Breakeven Point
• Quantity of output where total revenues equal total costs
• Point where operating income equals zero
$2,000
Operating
$0 loss
0 10 20 30 40 50
Units Sold
Target Operating Income
• For most firms in the private sector, the main objective is not
to breakeven
• Convert after-tax desired net income to its before-tax
equivalent operating income
Target operating income
= Target net income / (1 - tax rate)
Target Unit Sales
= (Fixed costs + Target operating income)
/ Contribution margin per unit
Target Dollar Sales
= (Fixed costs + Target operating income)
/ Contribution margin %
Sensitivity Analysis
Merchandising Sector
Manufacturing Sector
0.5
Probability
Proposal A: 0.4
Spy Novel 0.3
0.2
1 2 3 4 5 6 7 8 9
Cash Inflow ($000,000)
0.1
Expected value
= (0.1*$300,000) + (.02*$350,000) + (.04*$400,000) +
(0.2*$450,000) + (0.1*$500,000)
= $400,000
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