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Lets suppose our company is in the business of manufacturing of ready made garments and out manufacturing units produces ready made shirts. Details related to
Lets suppose our company is in the business of manufacturing of ready made garments and out manufacturing units produces ready made shirts. Details related to the cost involved in the manufacturing process and selling price are given below: | ||
selling price per unit of shirt | 50 | |
total of variable cost per unit | 20 | |
total of fixed cost related to manufacturing of shirts | 200000 | |
total units sold | 10000 | |
From the given information we would calculate the break even point in units, in dollars and margin of safety | ||
Income statement | ||
total sales | 50*10000 | 500000 |
total of variable cost | 20*10000 | 200000 |
total contribution margin | 300000 | |
total of fixed cost | 200000 | |
total operating income | 100000 | |
contrubution margin per unit | 50-20 | 30 |
contribution margin ratio | 30/50 | 60% |
Break even sales in units = total fixed cost/contribution margin per unit | 200000/30 | 6667 |
Break even sales in dollars = total fixed cost/contribution margin ratio | 200000/60% | 333333 |
Margin of safety = actual sales-break even sales | 500000-333333 | 166667 |
From the break even analysis of the above company, it is found that company's break even sales in units is 6667 units and 333333 in dollars and actual sales of the company is 500000 and margin of safety is 166667 and it is clear that company is selling above the break even point and maintains good amount of margin of safety and this will help to adjust the losses due to any change in sales |
please provide me of Proper financial statement for this propose Business Idea and the computation of break even analysis.
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