Monthly Production Data
|
Month |
No. of days |
Cake 1 |
Cake 2 |
Cake 3 |
Total cakes |
|
1 |
31 |
5,700 |
1,900 |
1,900 |
9500 |
|
2 |
28 |
5,280 |
1,760 |
1,760 |
8800 |
|
3 |
31 |
4,500 |
1,500 |
1,500 |
7500 |
|
4 |
30 |
3,900 |
1,300 |
1,300 |
6500 |
|
5 |
31 |
4,320 |
1,440 |
1,440 |
7200 |
|
6 |
30 |
4,500 |
1,500 |
1,500 |
7500 |
|
7 |
31 |
4,920 |
1,640 |
1,640 |
8200 |
|
8 |
31 |
4,980 |
1,660 |
1,660 |
8300 |
|
9 |
30 |
5,100 |
1,700 |
1,700 |
8500 |
|
10 |
31 |
5,400 |
1,800 |
1,800 |
9000 |
|
11 |
30 |
5,640 |
1,880 |
1,880 |
9400 |
|
12 |
31 |
6,000 |
2,000 |
2,000 |
10000 |
|
Total Cake of Each Type Produced in the year |
60,240 |
20,080 |
20,080 |
|
Selling Price |
Amount (in $) |
|
Cake 1 |
7 |
|
Cake 2 |
6.5 |
|
Cake 3 |
7.2 |
|
Variable Cost |
Amount (in $) |
Adjusted Amount (in $) |
Variable Cost Per Unit ($) |
|
Cake 1 |
$319,665.80 |
$319,665.80 |
5.31 |
|
Cake 2 |
$54,609.80 |
$49,148.82 |
2.45 |
|
Cake 3 |
$54,609.80 |
$60,070.78 |
2.99 |
|
Gross Margin |
Amount ($) |
|
Cake 1 |
1.693 |
|
Cake 2 |
4.052 |
|
Cake 3 |
4.208 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
423 |
|
Cake 2 |
459 |
|
Cake 3 |
414 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
66014.20 |
|
Cake 2 |
45371.18 |
|
Cake 3 |
48505.22 |
The required BEP amount in Units for all the three types of the cakes with corporate tax rate of 30 %:
|
BEP with Tax Rate |
||
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
BEP in unit after Deducting tax |
|
Cake 1 |
1771.5 |
2302.974 |
|
Cake 2 |
740.3 |
962.405 |
|
Cake 3 |
712.9 |
926.712 |
|
BEP in Sales Dollar |
Amount ($) |
BEP in dollars after Deducting tax |
|
Cake 1 |
66014.2 |
85818.46 |
|
Cake 2 |
45371.18 |
58982.534 |
|
Cake 3 |
48505.22 |
63056.786 |
It can be seen that as Aussie Bakery needs pay corporate tax rate at 30% it needs to sell more no. of units than the former case.
Margin of Safety = Current Output – Break Even Output
|
BEP Output |
Units in Month |
Units in Year |
Margin of Safety |
|
Cake 1 |
1772 |
21258.21699 |
38,982 |
|
Cake 2 |
740 |
8883.735003 |
11,196 |
|
Cake 3 |
713 |
8554.264458 |
11,526 |
|
20% Increase in sale |
|||||
|
Month |
No. of days |
Cake 1 |
Cake 2 |
Cake 3 |
Total cakes |
|
1 |
31 |
5,700 |
1,900 |
1,900 |
9500 |
|
2 |
28 |
5,280 |
1,760 |
1,760 |
8800 |
|
3 |
31 |
4,500 |
1,500 |
1,500 |
7500 |
|
4 |
30 |
3,900 |
1,300 |
1,300 |
6500 |
|
5 |
31 |
4,320 |
1,440 |
1,440 |
7200 |
|
6 |
30 |
4,500 |
1,500 |
1,500 |
7500 |
|
7 |
31 |
4,920 |
1,640 |
1,640 |
8200 |
|
8 |
31 |
4,980 |
1,660 |
1,660 |
8300 |
|
9 |
30 |
5,100 |
1,700 |
1,700 |
8500 |
|
10 |
31 |
5,400 |
1,800 |
1,800 |
9000 |
|
11 |
30 |
5,640 |
1,880 |
1,880 |
9400 |
|
12 |
31 |
6,000 |
2,000 |
2,000 |
10000 |
|
Total Cake of Each Type Produced in the year |
72,288 |
24,096 |
24,096 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
1656 |
|
Cake 2 |
686 |
|
Cake 3 |
653 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
94929.40 |
|
Cake 2 |
69306.54 |
|
Cake 3 |
74769.86 |
|
20% Decrease in sale |
|||||
|
Month |
No. of days |
Cake 1 |
Cake 2 |
Cake 3 |
Total cakes |
|
1 |
31 |
5,700 |
1,900 |
1,900 |
9500 |
|
2 |
28 |
5,280 |
1,760 |
1,760 |
8800 |
|
3 |
31 |
4,500 |
1,500 |
1,500 |
7500 |
|
4 |
30 |
3,900 |
1,300 |
1,300 |
6500 |
|
5 |
31 |
4,320 |
1,440 |
1,440 |
7200 |
|
6 |
30 |
4,500 |
1,500 |
1,500 |
7500 |
|
7 |
31 |
4,920 |
1,640 |
1,640 |
8200 |
|
8 |
31 |
4,980 |
1,660 |
1,660 |
8300 |
|
9 |
30 |
5,100 |
1,700 |
1,700 |
8500 |
|
10 |
31 |
5,400 |
1,800 |
1,800 |
9000 |
|
11 |
30 |
5,640 |
1,880 |
1,880 |
9400 |
|
12 |
31 |
6,000 |
2,000 |
2,000 |
10000 |
|
Total Cake of Each Type Produced in the year |
48,192 |
16,064 |
16,064 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
1978 |
|
Cake 2 |
839 |
|
Cake 3 |
827 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
37099.00 |
|
Cake 2 |
21435.82 |
|
Cake 3 |
22240.58 |
In case of any fluctuation in the sale it is recommended for the business to take the decision based on increase or decrease in the sales revenues. In case there is an increase in the sales revenue in the company can look forward to increase the variable cost to provide even greater push to the sales of the cakes. In case there is decrease in the sales revenue, company should look forward to put a hold on the variable costs.
Based on the calculation of dollar values the company must attain the following when PAT $ 150000
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
423 |
|
Cake 2 |
459 |
|
Cake 3 |
414 |
The impact of the increase in fixed cost by 20,000 annually and decrease in variable costs by 10% will have the following implication on breakeven sales mix:
|
Fixed Cost (Rent) |
Amount (in $) |
|
Cake 1 |
4666 |
|
Cake 2 |
4666 |
|
Cake 3 |
4666 |
|
Variable Cost Per Unit ($) |
|
4.78 |
|
2.20 |
|
2.69 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
1287 |
|
Cake 2 |
834 |
|
Cake 3 |
785 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
182316.78 |
|
Cake 2 |
76390.06 |
|
Cake 3 |
83427.50 |
In case the variable cost and the selling price are increased by 15% and 20% respectively, the following will be the results:
|
Selling Price |
Amount (in $) |
|
Cake 1 |
8.4 |
|
Cake 2 |
7.8 |
|
Cake 3 |
8.64 |
|
Variable Cost Per Unit ($) |
|
Cake 1 6.10 |
|
Cake 2 2.81 |
|
Cake 3 3.44 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
1306 |
|
Cake 2 |
602 |
|
Cake 3 |
577 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
102400.33 |
|
Cake 2 |
64102.86 |
|
Cake 3 |
68409.80 |
If both fixed costs and contribution margins increase by 20% the results will be as follows:
|
Fixed Cost (Rent) |
Amount (in $) |
|
Cake 1 |
3600 |
|
Cake 2 |
3600 |
|
Cake 3 |
3600 |
|
Contribution Margin Increased by 20 % |
Amount ($) |
|
Cake 1 |
2.032 |
|
Cake 2 |
4.863 |
|
Cake 3 |
5.050 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
2126 |
|
Cake 2 |
888 |
|
Cake 3 |
855 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
86417.04 |
|
Cake 2 |
61645.42 |
|
Cake 3 |
65406.26 |
The results for new break-even point if the number of units sold increases by 25% are explained below as follows:
|
25% Increase in sale |
|||||
|
Month |
No. of days |
Cake 1 |
Cake 2 |
Cake 3 |
Total cakes |
|
1 |
31 |
5,700 |
1,900 |
1,900 |
9500 |
|
2 |
28 |
5,280 |
1,760 |
1,760 |
8800 |
|
3 |
31 |
4,500 |
1,500 |
1,500 |
7500 |
|
4 |
30 |
3,900 |
1,300 |
1,300 |
6500 |
|
5 |
31 |
4,320 |
1,440 |
1,440 |
7200 |
|
6 |
30 |
4,500 |
1,500 |
1,500 |
7500 |
|
7 |
31 |
4,920 |
1,640 |
1,640 |
8200 |
|
8 |
31 |
4,980 |
1,660 |
1,660 |
8300 |
|
9 |
30 |
5,100 |
1,700 |
1,700 |
8500 |
|
10 |
31 |
5,400 |
1,800 |
1,800 |
9000 |
|
11 |
30 |
5,640 |
1,880 |
1,880 |
9400 |
|
12 |
31 |
6,000 |
2,000 |
2,000 |
10000 |
|
Total Cake of Each Type Produced in the year |
75,300 |
25,100 |
25,100 |
|
BEP in Units |
Fixed Cost/(SP per unit – VC per unit) |
|
Cake 1 |
1635 |
|
Cake 2 |
677 |
|
Cake 3 |
642 |
|
BEP in Sales Dollar |
Amount ($) |
|
Cake 1 |
102158.20 |
|
Cake 2 |
75290.38 |
|
Cake 3 |
81336.02 |
Reference list
Alnasser, N., Samih Shaban, O., & Al-Zubi, Z. (2014). The Effect of Using Break-Even-Point in Planning, Controlling, and Decision Making in the Industrial Jordanian Companies. International Journal of Academic Research in Business and Social Sciences, 4(5), 2222–6990. https://doi.org/10.6007/IJARBSS/v4-i5/888
Laskaris, J., & Regan, K. (2013). The new break-even analysis. Healthcare Financial Management?: Journal of the Healthcare Financial Management Association, 67(12), 88–95. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/24380255
Nedic, I. (2015). BREAK-EVEN POINT IN SUGAR-BEET PRODUCTION. EKONOMSKI VJESNIK, 28(1).
Oe, A., & Mitsuhashi, H. (2013). Founders’ experiences for startups’ fast break-even. Journal of Business Research, 66(11), 2193–2201. https://doi.org/10.1016/j.jbusres.2012.01.011
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