COST VOLUME PROFIT ANALYSIS

BREAKEVEN POINT

TYU 1
A)

PU
SP 25
VC 20

FC 50000

CONTR 50000
CPU 5

NO OF UNITS 10000

B) C)
PROFIT 40000
FOXED COSTS 50000

CONTRIBUTION 90000
CPU 5
NOU 18000

D)
SALES 325000
VARIABLE COSTS 260000
CONTRIBUTION 65000

PVR 0.2

E)
SALES 250000

F)
CONTRIBUTION 90000
CPPU 5
NO OF UNITS 18000

SALES 450000
EG: 1

SP 50
VCPU 37.5

FC 20000

QTY 10000

CALCULATE PROFIT .PV RATIO AND BREAKEVEN POINT IN UNITS

SALES 500000
VARIABLE COSTS 375000
CONTRIBUTION 125000

FC 20000

PROFIT 105000

PVR 25

FC=CONTRIBUTION 20000
BEP IN UNITS 1600
BEP IN SALES 80000

BEP IN SALES VALUE 80000

Q1:
SP 100
VCPU 80

FC 20000

QTY 2000

CALCULATE PROFT ,PVR AND BP IN UNITS AND REVENUE

SALES 200000
VC 160000
CONTR 40000
FC 20000
PROFIT 20000

PVR 20

BEP UNITS 1000

BEP IN REVENUE 100000 PVR DOESNOT CHANGE WTH CHANGE IN UNITS
OR
 100000

MARGIN OF SAFETY
Q1:
SP 250
VCPU 200

FC 10000
QTY 5000

CALCULATE PROFIT,PVR,BEP UNIT,BEP VALUE,MOS

SALES 1250000
VC 1000000
CONTRIBUTION 250000
FC 10000
PROFIT 240000

PVR 20

BEP UNITS 200

BEP VALUE 50000

MOS 1200000
IN UNITS 4800 OR 5000-200

Q2:
SP 50
VC PU 40

QTY 1000
FC 2500

CALCULATE PROFIT PVR BEP UNIT,BEP VALUE ,MOS UNIT ,MOS VALUE

SALES 50000
VC 40000
CONTR 10000
FC 2500
PROFIT 7500

PVR 20 VCR 80

BEP UNITS 250

BEP VALUE 12500

MOS 37500
MOS UNITS 750
MOS PERCENTAGE 75
BEP PERCENTAGE 25

BEP OF MULTIPRODUCT BUSINESS

PRODUCTS A B

SP 20 10
VCPU 16 5
QTY 4000 2000
PVR 20 50

FC 10000

CALCULATE BEP VALUE

A B TOTAL
SALES VALUE 80000 20000 100000

WA PVR 26 PERCENTAGE

BEP VALUE 38461.538

A 30769.231 USING WEIGHTED AVERAGE SALES VALUE

B 7692.3077

A B
CONTR 10000 6153.846 3846.154
FC 10000
PROFIT 0

Q1
CALCULATE BEP OF X AND Y SEPARATELY

X Y
SP 10 100
VC PU 8 60
QTY 6000 1000
CPU 2 40
FC 20000

PVR 20 40

SALES VALUE 60000 100000 160000

WA PRV 32.5

BEP VALUE 61538.462

X Y
SPLIT 23076.923 38461.54

EXAMPLE 1 WB
PL CO

M N
SP 7 15
VC 2.94 4.4

FC 123600

PVR 58 70.66667
WA PRV 61.8

QTY PROPORTION 5 1
VALUE 35 15 50

BEP VALUE 200000

M N
SPLIT 140000 60000

EG: TARGET PROFIT

PROFIT 52000
FC 80000
CONTRIBUTION 132000

F G H
SP 22 15 19
VC 16 12 13
CPU 6 3 6
PVR 27.27% 20.00% 31.58%
SALES PROPORTION 44 15 57 116 2 1

WA PVR 28%

SALES REQ 464000 UNITS CANNOT BE USED AS THE V

SPLIT 176000 60000 228000
UNITS 8000 4000 12000
VC 128000 48000 156000

Q2
A B
SP 10 20
VC 5 16
FC 10000

SALES QTY PROPORTION 4 5

PROFIT REQ 50000

SALES OF A ND B??

CONTRIBUTION 60000

A B
PRV 50% 20%

WA PVR 29%

SALES VALUE PROP 40 100 140

SALES 210000

A B
SPLIT 60000 150000

MULTIPRODUCT BEP UNITS

Q3
 A B
SP 20 50
VCPU 12 40
QTY 5000 7000

FC 20000

CPU 8 10

QTY PROPORTION 5000 7000 12000

WA CPU 9

BEP UNITS 2182

SPLIT A B
UNITS 909 1273

eg: ALPHA BETA GAMMA

BETA GAMMA DELTA

SP 135 165 220
VC 72.8 57.9 146.2

FC 1025000

PVR 46% 65% 34%

SALES MIX 405 660 1100 2165

WA PVR 0.0861894 0.197875 0.170439 45%

BEP VALUE 2255208.3

SPLIT 421875 687500 1145833

Q1
BA produces and sells two products. The W sells for $8 per unit and has a total variable cost of $3.80 per
unit, while the R sells for $14 per unit and has a total variable cost of $4.30. For every five units of W
sold, six units of R are sold. BA's expected fixed costs are $83,160 for the per period.
Budgeted sales revenue for next period is $150,040, in the standard sales mix.
Required
Calculate the margin of safety in terms of sales revenue and also as a percentage of budgeted sales
revenue.

W R
SP 8 14
VC 3.8 4.3
PVR 52.50% 69.29%

SALES MIX 40 84 124

WA PVR 63.87% W R
48400 101640 150040
BEP VALUE 130200 6050 7260 13310

MOS VALUE 19840

PERCENTAGE 13.22%
SPLIT 6400 13440

MARGINAL COSTING VS ABSORPTION COSTING

MARGINAL COSTING
PERIOD 1 PERIOD 2
SALES 7200 10200

VARIABLE PROD COST 6000 5600

OP INV 0 1200
CL INV 1200 4800 0
6800

VARIABLE SELLING COSTS 0 0

CONTRIBUTION 2400 3400

FIXED PROD COST 1500 1500

FIXED SELL.COST 500 500
PROFIT 400 1400

TOTAL PROFIT 1800

ABSORPTION COSTING

PERIOD 1 PERIOD 2 WORKINGS

SALES 7200 10200 OAR

VARIABLE PRODN COST 6000 5600

FIXED PRODN COST 1500 1400
OP INV 0 1500
CL INV 1500 0
OA/UA 0 UA 100
6000 8600

GROSS PROFIT 1200 1600

FIXED SELLING COSTS 500 500

VARIABLE SELLING COSTS 0 0

NET PROFIT 700 1100

TOTAL PROFIT 1800

QUESTION 2

MARGINAL COSTING
FIRST 6 M

SALES 980000

VARIABLE PRO COST 416500

OP STOCK 0 OAR 20
CLO STOCK 73500 BUDGETED UNIT 16000
VARIABLE SELLING COSTS 196000
539000 BUDGTED FPC 320000

CONTRIBUTION 441000 6M 160000

FPC 160000
FSC 90000 FSC 180000
6M 90000
PROFIT 191000
VSC 28

2ND 6M

SALES 1120000

VARIABLE PRO COST 343000

OP STOCK 73500
CLO STOCK 24500
392000
VARIABLE SELLING COSTS 224000

CONTRIBUTION 504000

FPC 160000
FSC 90000

PROFIT 254000

ABSORPTION COSTING
FIRST 6M SECOND 6M

SALES 980000 1120000

VARIABLE PROD COST 416500 343000

FIXED PROD COST 170000 140000
OP STOCK 0 103500
CLO STOCK 103500 34500

OA 10000 UA 20000
473000 572000

GROSS PROFIT 507000 548000

FIXED SELLING COSTS 90000 90000

VARIABLE SELLING COSTS 196000 224000

NET PROFIT 221000 234000

 3 6

NNOT BE USED AS THE VALUE IS IN SALES

WORKINGS
BUDGETED FC
1 BUDGETED ACTIVITY LEVEL

ACTUAL FC 1500
ABSORBED 1400
UA 100
ACCEPTANCE OR REJECTION OF OFFER

INCREMENTAL REVENUE 45000 INCREMENTAL COST

CURRENT UNITS 35000

MATERIAL A 1 KG PER UNIT

FOR 35000 UNITS 35000 KG

COST PER UNIT 0.714286

INCREASED COST 0.75

EXTRA COST 3750

MATERIAL B 1 LT PER UNIT

35000

1.428571 PER UNIT

INCREASED COST 1.471429

EXTRA COST 7357.143

LABOUR 1HR UNIT

FOR 35K UNITS 35000 HRS

COST /UNIT 2.142857

FOR 1000 UNITS 2142.857

FOR 4000 UNITS 14000

VARIBALE OH 50000
PER UNIT 1.428571

FOR 5000 UNITS 7142.857

FOH INCREMENTAL 5000

39392.86

INCREMENTAL PROFI 5607.143

MINIMUM PRICE
THE PRICE AT WHICH THE FIRM WOULD BREAK EVEN.
CURRENT PROFIT WILL NOT INCREASE OR DECREASE

FULL COST PLUS PRICING

COST
VC 4 BFC 60000
FC 3 UNITS 20000
7 AR 3

PROFIT 2.8

SP 9.8
 MAXIMUM PRICE IS FOUND TO REDUCE THE RISK

DM 31.05
DL 23 AR 12 PER HR
VOH 3.3 FC PU 48 PRODUCTIVITY MEANS LABOUR HOURS
FC 55.2
OPPORTUNI 5.5
COST 118.05
PROFIT 23.61
SP 141.66

MARGINAL COST PLUS METHOD

EG 1
DM 5
DL 3
VOH 7

400 UNITS TO BREAK EVEN

MC 15

CONTRIBUTION RE 10000
CPU 25

SELLING PRICE 40

MARKUP 166.6667 IE 25

profit maximisation and output level

PROFIT MAXIMISED WHEN MC = MR

Q1
SP 10
VC 8 vc 2

Q 1000

1.CALCULATE CURRENT CONTRIBUTION

2.CALCULATE CONTRIBUTION IF PRICE INCREASES INCREASES 16% AND Q decreases BY 55

3. calculate contribution IF PRICE DECREASES BY 10% AND Q INC 5%

1)
SALES 10 10
VC 8 2
cpu 2 8
CONTRIBU 2000 8000

2)
SP 11 11
VC 8 2
CPU 3 9

UNITS 950

CONTRIBU 2850 8550

3)
SP 9 9
VC 8 2
CPU 1 7

UNITS 1050

CONTRIBU 1050 7350

if inelastic,increase the price

sales decrease as demand falls

variable cost decrease
 price increases by larger percentage

Q2
SP 10
VC 8 vc 2

Q 1000

1.CALCULATE CURRENT CONTRIBUTION

2.CALCULATE CONTRIBUTION IF PRICE INCREASES INCREASES 5% AND Q decreases BY 10%

3. calculate contribution IF PRICE DECREASES BY 5%% AND Q INC 10%

1)
SALES 10 10
VC 8 2
cpu 2 8
CONTRIBU 2000 8000

2)
SP 10.5 10.5
VC 8 2
CPU 2.5 8.5

UNITS 900

CONTRIBU 2250 7650

3)
SP 9.5 9.5
VC 8 2
CPU 1.5 7.5

UNITS 1100

CONTRIBU 1650 8250

IVITY MEANS LABOUR HOURS
MAXIMIN RULE

PROJECTS
D E F
1 100 80 60
SCENARIOS 2 90 120 85
3 -20 10 85
PROJECT F IS SELECTED

MINIMUM VALUES OF THE PROJECTS

-20 10 60

BEST OF THE WORST 60

MAXIMAX RULE

PROJECTS
D E F
1 100 80 60
SCENARIOS 2 90 120 85
3 -20 10 85

MAXIMUM VALUES 100 120 85

MAX 120 PROJECT E IS SELECETED

MINIMAX REGRET RULE

PROJECTS
D E F
1 100 80 60
SCENARIOS 2 90 120 85
3 -20 10 85

1ST STEP: CREATE REGRET TABLE USING SCENARIOS OR POSSIBILITIES

REGRET = PROFIT FROM BEST DECISION - PROFIT FROM THE DECISION MADE

2ND STEP: CHOOSE THE MINIMUM REGRET FROM THE MAXIMUM VALUE OF REGRETS FOR EACH PROJECTS/D
REGRET TABLE

PROJECTS
D E F
1 0 20 40
SCENARIOS 2 30 0 35
3 105 75 0

MAX REGRETS OF EACH DECISIONS

105 75 40

MIN 40 SO PROJECT F IS SELECTED

 PROJECT WISE:
MAXIMIN
MAXIMAX

SCENARIO WISE:
MINIMAX REGRET

ETS FOR EACH PROJECTS/DECISIONS

 SCENARIO BEST DECISION
SCENE 1: 100
SCENE 2 120
SCENE 3 85

CT F IS SELECTED
Oreilly
units req units in invBV SV PP
A 1000 0 0 0 6 6000
B 1000 600 2 2.5 5 5000
C 1000 700 3 2.5 4 2950
D 200 200 4 6 9 1500
15450
WORKINGS
MATERIAL D

MATERIAL E COSTS 1500 WOULD HAVE BEEN SAVED

SCRAP 1200 WOULD HAVE RECEIVED

BEST ALTERNATIVE 1500

WE USED THEM FOR THE SPECIAL JOB

ennerdale co

MATERIALS

K
PRICE PER KG 9.8
NEW PRICE 10.29

REQ 3000
IN INV 2000

2000 TO BE REPLACED AND 1000 TPO BE BOUGHT

COST 30870

L
IN STOCK 250 KG
REQ 200

SCRAP 2200

COST 2200

LABOUR
REQ HRS 800
PAY RATE 9.5

LABOUR CHARGE 7600

FOR PRODUCT P
LABOUR RATE PER UNIT 38
PER HOUR 9.5

HOURS RE FOR A UNIT 4 contribution per hour 10

LOST PRODUCTION OF P IN UNIT 200

LOST CONTRIBUTION 8000 8 00 hrs 8000

COST 15600

TOTAL RELEVANT COST 48670

joint products
ALSH PLUS 195000 ALASH jp
sales 125000 alsh
ALSH 125000
pottum
INCREMENTAL income 70000 sales 100000
225000

INCREMENTAL COST 50000

125000
20000 83333
ptofit 41667

sales 195000
83333
50000
profit 61667

increase in 20000
150000
83333
EXAMPLE 1

MASH SAUS
SP 14 11
VC 8 7
6 4

HOURS REQ FOR FULL PRODUCTION 6000 5000

AVAILABLE HOURS 8000

CONTRIUBUTION PER LAB HR =CONTRIBUTION PER UNIT/NO OF HIURS PER UNIT

3 4
RANK 1 2

SO SAUS SHOULD BE PRODUCED FIRST

SAUS 20000

REM HOURS 3000

MASH 9000

TOTAL CONTRIBUTION 29000

FC 20000
PROFIT 9000

EXAMPLE 2 REDO AND REWATCH

X Y Z
DEEMAND 550 500 400
SP 16 18 14
VC 12 12 11
CPU 4 6 3

TEST OF LIMITING FACTOR

MATERIAL
DEMAND 550 500 400
IN STOCK 250 0 200
PRODUCTION 300 500 200
MATERIAL COST PER UNIT 8 6 2
MATERIAL COST 2400 3000 400 5800

AVAILABLE MATERIAL 4800

IS A LIM FACTOR
LABOUR
DEMAND 550 500 400
IN STOCK 250 0 200
PRODUCTION 300 500 200
LAB COST PER UNIT 4 6 9
MATERIAL COST 1200 3000 1800 6000

AVAILABLE LABOUR 6600

NOT A LIM FACTOR

CONT. PER MATERIAL COST 0.5 1 1.5

RANK 3 2 1

UNITS
Z PRODUCED FIRST
MATERIAL COST 400 200

Y PRODUCED NEXT
MATERIAL COST 3000 500

X PRODUCED NEXT
MATERIAL COST 1400 175

TOTAL CONTRIBUTION
X 1700 ONLY 175 PLUS 250 UNITS SOLD
Y 3000 500 UNITS SOLD
Z 1200 400 UNITS SOLD
5900

EXAMPLE 3

MM CO

AVAILABLE HOURS 24000

S A T
HOURS REQUIRED 12000 8000 16000

VC 20 36 24
COST TO BUY 29 40 34
COST SAVED OR EXTRA COST 9 4 10
MACHINE HRS PER UNIT 3 2 4
COST SAVED PER HOUR 3 2 2.5
RANK TO BUY 3 1 2
RANK TO MAKE 1 3 2

UNITS
S MADE FIRST 12000 4000
REM HOIRS 12000

T MADE NEXT 12000 3000

BUY
S 0
A 4000
T 1000

COST MAKE BUY

S 80000 80000
A 160000 160000
T 72000 34000 106000 1 FULL UNIT REQUIRES 1 UNIT FROM EA
346000

ASSEMBLY COST 80000

TOTAL COST 426000

EXAMPLE 4

D E
DEMAND 9000 12000

VC 10 15

AVAILABLE MATERIALS 87500 KG

REQUIRED KG 127500 KG

COST IF BOUGHT 17 25
VC 10.00 15.00
COST SAVED 7.00 10.00
MAT REQ 3.5KG 8KG
COST SAVED PER KG 2 1.25
MAKE 1 2

D MADE FIRST 31500 9000

E MADE NEXT 7000

COST TO BUY UNITS

D 0 0
E 125000 5000

COST TO MAKE
D 90000 9000
E 105000 7000
320000

CUT AND STITCH

W NO OF SUITS
L NO OF LOUNGE SUITS

TIME 7L + GL <= 3500

FABRIC 2W+2L<=1200

DEMAND W<=400
X,Y >=0
W L
C 48W+40L CPU 48 40

FEASIBLE REGION OABCD

POINT A POINT D
W 0 W 400
L 600 L 0

C 24000 19200

POINT C POINT B
W=400 7W+5L 3500
7W+5L=3500 2W+2L 1200

5L 700 7W+7L 4200

L 140 LESS 7W+5L 3500
2L 700
C 24800 L 350

2W 500
 W 250

C 26000

THE OPTIMUM MIX 26000

WORK SUIT 250
LOUNGE SU 350

B)
SHADOW PRICING
FOR LABOUR HOURS
TWO LINES ON THE OPTIMAL MIX
7W+5L 3500 1 3501

2W+2L 1200 1200

7W+7L 4200
7W+5L 3501
2L 699
L 349.5

2W 501
W 250.5

C 26004

SHADOW PRICE 4 26004-26000

OF LABOUR

FOR FABRIC

7W+5L 3500

2W+2L 1201 1200+1

7W+7L 4203.5
7W+5L 3500
2L 703.5
L 351.75

2W 497.5
W 248.75
 C 26010
PREV C 26000
SHADOW P 10
OF MATERIAL

C)
7W+5L 4000
2W+2L 1200

7W + 7L 4200
7W+5L 4000
2L 200
L 100

W 500

C 28000
OLD C 26000
INCREMENTAL C 2000 INCREMN COST 1500

OR

SHADOW PRICE OF LABOUR 4 EXTRA C PER EXTRA HOUR

FOR 500 HOURS 2000
INCREMN COST 1500

OR SHADOW PRICE 4
COST PER LABOUR 3

SO ACCEPT THE DECISION

SHADOW PRICE IS THE EXTRA CONTRIBUTION EARNED BY WORKING AN EXTRA HOUR.IN THIS CASE THE SHADOW PRICE O
AS THE EXTRA COST OF 3 PER HPURS IS LESS THAN THE SHADOW PRICE OF 4 PER HOUR,THE OFFER SHOULD BE ACCEPTED
WE EARN AN EXTRA CONTRIBUTION OF 1 PER HOUR

D)
POINT B NEW POINT D
W 200
2W+2L 1200 L 0
W=200
C 9600
5L 800
L 400
C 25600

POINT A

C 24000

ALL OTHER POINTS IN A WILL BE REMOVED AS THEY DONOT FORM THE EDGES.

example
A co produces…

8x+10y<=11000 1
4x+10y<=9000 22
12x+6y<=12000 3

y<=600
x,y>=0

C= 4x+8y

8x+10y<=11000

IF X =0
Y 1100

IF Y=0
X 1375

4x+10y<=9000
Y 900
X 2250

12x+6y<=12000
Y 2000
X 1000

Y 600
X 0

POINT B
Y 600
X 0

C 4800

POINT E
X 1000
Y 0

C 4000

POINT C
Y=600 600
8x+10y<=11000

8X 5000
X 625

C 7300

POINT D
12x+6y<=12000
8x+10y<=11000

12X+15Y 16500
12X+6Y 12000
9Y 4500
Y 500

8X 6000
X 750

C 7000

OPTIMAL SOLUTION
X 625
Y 600
USED AVAILABLE
DEP A HOURS 11000 11000 BINDING
DEP B 8500 9000 SLACK 500
DEP C 11100 12000 SLACK 900

REMAINING BC DEP A HAS USEED UP

SAY MINIMUM 500 X SHOULD HAVE BEEN SOLD
SURPLUS 625-500 SURPLUS
NIT REQUIRES 1 UNIT FROM EACH OF S ,A ,T
3.5
 EXTRA C PER EXTRA HOUR

HIS CASE THE SHADOW PRICE OF LABOUR IS $ 4

E OFFER SHOULD BE ACCEPTED
A HAS USEED UP
 X Y Z PRODUCTION
CPU 4 6 3 UNITS
LFPU 8 6 2
CPLF 0.5 1 1.5 MATERIAL
3 2 1
COST UNITS
AVAILABLE 4800 LABOUR
Z FIRST 400 200
4400
Y NEXT 3000 500
1400
X LAST 1400 175

S A T
PC 29 40 34
VS 20 36 24 REQ
CSAVEDPU 9 4 10
LFPU 3 2 4
CSPU 3 2 2.5
RANKING TO MAKE INHIU 1 3 2

AVILABLE 24000
S FIRST 12000 4000
12000
T NEXT 12000 3000

A LAST 0 0

D E
PC 17 25
VC 10 15
SAVED PU 7 10
LF PU 3.5 8
2 1.25
1 2

AVAILABLE 87500
D ISRT 31500 9000
56000
E LAST 56000 7000
X Y Z
300 500 200

8 6 2 4800
2400 3000 400 5800 LIMITING FACTOR

4 6 9
1200 3000 1800 6000

36000
ALKA HOTEL

NO OF ROOMS 25
AVAILABLE OCCUPANCY 9125 FOR 365 DAYS
BUDGETED OCCUPANCY 6387.5

A)
BUDGETED REVENUE 1149750
VARIABLE COSTS 383250
CONTRIBUTION 766500
FIXED COSTS 600000
PROFIT 166500

TO BREAK EVEN,
FC 600000 CONTRIBUTION

REVENUE PER OC ROOM 180

VC PER OCUPIED ROOM 60
CPU 120

BEP 5000 900000 78.27788649706

MARGIN OF SAFETY UNITS 1387.5

REVENUE 249750

Mos 21.72211350294

B)
BUDGETED REV 162000 IF
VARIABLE COSTS 54000
108000 C
FIXED COSTS 150000 FC
LOSS -42000 LOSS

C)
REVENUE FOR TWO NIGHTS 235
VC 215
CONTRIBUTION PER TWO DAY 20

PVR 8.510638297872

BER 235000

REVENUE PER NIGHT 117.5

NO OF NIGHTS TO SELL 2000

AVAILABLE RROMS 2281.25 DONOT SUSE THE OCCUPANCY AS ITS FOR REVENUE FIND
ALREADY OCCUPIED 900
REMAINING 1381.25 AVAILABILITY IS NOT BASED ON OCCUPANCY

NOT VIABLE

D)
SALES 1825
VARIABLE COSTS 693.5
CONTRIBUTION 1131.5
FIXED COSTS 800
PROFITS 331.5

MOS 2139 UNITS

BEP 5161 UNITS

IF OCCUPIED ROOMS EXCEED 5161 IT WILL BECOME PROFITABLE

THERE IS 2 LAKH INCREASE IN THE FC WHEN RESTAURANT IS STARTED

ROOM RATE HAS INCREASED TO 250
VARIABLE COST HAS INCREASED TO 95
BEP UNITS HAS INCREASED TO 5161 FROM 5000
OCCUPANCY HAS INCREASED
MOS HAS INCREASED

GAM CO

SALES VOLUME PRICE VC PER UNIT CPU

120 30 11 19
110 30 11 19
140 30 11 19
108 35 11 24
100 35 12 23
94 35 12 23

C)
UNDER THE MAXIMIN DEC RULE,THE MINIMUM CONTRIBUTIONS OF THE DECISIONS ARE COSDERED AND THEN THE MAX

PROFIT
930
740 30
1310 740

1172
880 35
742 742

CARDIO CO
T C R
UNITS 420 400 380

SP 1600 1800 1400

VC:
MATERIAL 430 500 360
LABOUR 88 96 76
VOH 110 120 95

CPU 972 1084 869

PVR 61% 60% 62%

SALES MIX 672000 720000 532000

WA PVR 61%

MARGIN OF SAFETY

FIXED COSTS 55000

FIXED LABOUR COSTS 132 144 114
55440 57600 43320

BER 346959

MOS 1577041.107111

BER WOULD BE REACHED EARLIER THAN WHEN SOLD IN THE CONSTANT MIX
TR CO

LABOUR COST 18 PER H

Y = A*X^B

AVG TIME 0.540985618063

TOTAL TIME 540.9856180626

Y999 0.54116024639
TOTAL TIME 540.619086144

TIME FOR 1000TH BATCH 0.366531918662

LABOUR COST PER BATCH 6.597574535924

MATERIAL Z 50
MATERIAL Y 150
MACHINE 2.199191511975
VC 208.7967660479

MR 208.7967660479

208.796766047898 = A-2BQ
400-2*0.0004Q
A
0.0008Q 191.2032339521 B
Q 239004

400

P 304.3983830239

SALES 72752444.05496
VC 49903271.13387
22849172.92109
FC 500000
PROFIT 22349172.92109
r has developed a new antimalaria drug which is expected to save millions of life
.it is unique and no other similar drug exists,demand is unknown and the launch is eagerly anticiapted oevr the wold.

Under market skimming strategy a high price will b charged for the drug initially when the product is introduced in the ma
Also as the co has a patent which preets its competitors from manufactuing the same drug,new entratns are discouraged.

also the product ins uique and is eagerly waited for all over th world

if the drug fails to gainmatjet its lif will be shot in this case its beter to adopt market skimming price

market penetration s ud when there are no signifcat barriers to new etrnats and aslo when the co wants to increase the sl
initially low price will be charged fro thedrug.
if the drg is inefefctive its demand will nt pickup even if its pice is ery low.resulting in lower slaes and income.This will prev

its advised to adop market skimming staretefy

q164 robber co
key pads screens
DIRECT MATERAILS 164 118.32
DIRECT LABOUR 40 60
HEAT AND POWER 44 58
MACHINE 31.5 36
DEPRECIATION 33.6 38.4
313100 310720
328000 344000
SAVINGS 14900 33280

VC
164 118.32
40 60

MACHINE 27.5 30
231.5 208.32
2.89375 2.604

B)
KEYPAD SCREEN
COST TO BUY 4.1 4.3
COST TO BUY 2.89 2.6
1.21 1.7
2.42 2.266666666667

RANK 2 1

100000
KEP 50000 100000
50000
SCREEN 50000 66666.66666667

33333.33333333

VARIABLE COSTS
key pads screens
DIRECT MATERAILS 164 118.32
DIRECT LABOUR 40 60
HEAT AND POWER 44 58
MACHINE 31.5 36

q290 kaplan

CAKES COOKIES SHAKES

BETTA COST PER UNIT 0.75 0.3 1.5
GRAM PER UNIT 0.5 0.2 1

DEMAND 11200 9800 2500

CONTRACT WITH ENCOMPASS 5000
TOTAL DEMAND 11200 9800 7500
BETTA REQUIRED IN GRAMS 5600 1960 7500
AVAILABLE
SHORTAGE

CAKES COOKIES SHAKES

CONTRIBUTION PER UNIT 2.6 1.75 1.2
GRAM PER UNIT 0.5 0.2 1
CONTRIBUTION PER UNIT GRA 5.2 8.75 1.2

RANK 2 1 3
UNITS SOLD 10080 9800 5000
CONTRIBUTION 26208 17150 5000

FIXED COSTS

PROFIT

B)
WHILE BREAKING THE AGREEMENT WOULD ALLOW THEM TO PRODUCE MORE SHAKES AND SELL AT THE RATE OF 6 PER S
DAMGED REPUATION AS UNRELIABLE AFURTHER SALES BEING LOST

THERFOIRE THEY SHOULD NOT BREACH THE GAREMENT WITH THE ENCOMPASS HELATH

C)
THE LINE REPRERSENTS THE ISO CONTRIBUTION LINE AON WHICH AT ANY POINT THE CONTRIBUTION WILL BE EQUAL
THE AREA REPRESENTS THE FEASIBLE REGION .THE OPTIMUM PRODUCTION PLAN LIES AT THE EDGES OF THE FEASIBLE RE

WITHIN THE FEASIBLE REGION THE CONSTARINTS WILL BE SASTISIFIED BY ANY PRODUCTION PLANS SLECETED
2

MOVE OUT THE ISO CONTRIBUTION LINE AWAY FROM THE ORIGIN WITH THE SLOPE BEING THE SAME.THE LAST POINT TH

A SLACK VALUE IS THE AMOUNT OF A RESOURCE IN EXCESS OF WHAT IS REQUIRED FOR THE OPTIMUM PRODUCTION PLA
HERE SLACK OCCURS FOR BETA AND SINGA AS THEY DONOT HAPPEN TO BE THE LINE ON WHICH THE OPTIMUM POINT O

bits and pieces

lost sales -96000
lost sales on other -118500
redundancy payments -6000
retraining cost saved 3500
recruitment cost -1200
saved labour cost 48000
rent 12000
supervisor 0
saved material cost 88500
net cost -69700

as its net cot its not beneifcial to stop the td now

workings
dw wm td
total material cost 350000 600000 60000
td stopped -60000
dw lost -17500
wm lost -30000
332500 570000 0

b)
quality of the products
effect o employees
customer preference

q297
A)
WHN MAKING AFURTHER PROCESSING DECISION SNIFC SHOULD CONSIDER WHETHER THE INCREMENTAL INCOME FROM
THEY SHOULD ALSO CONSIDER WHETHER THE PRODUCT WOULD BE ACCEPTED BU THE MARKET .IF THE COST EXCEEDS TH

PRICE PER MILLILITRE 0.3998

IF 1000 LITRES ARE SOLD WO FURTHER PROCESSING

SALES COST
SALES 399800
HORMONES MAL
AFTER FURTHER PROVESSING HORMONES FEMA
LABOUR COST
SALES MALE
MALE-W1 151500 FEMALE
FEMALE-W2 480760
632260 LOST CONTRIBUT
SUPERVISOR
INCREMENTAL SALES 232460 FIXED COST

NET COST -960

THERFORE THE PROCESS SHOULD NOT BE FURTHER PROCESSED

SALES

MALE FEMALE WORKINGS

STDANDARD 79960 319840 W1:MALE VERSION
HORMONE 151500 480760 INPUT
INCREMENTAL SALES 71540 160920 HORMONE ADDE
 TOTAL

COST W2:FEMALE VERSION

MALE FEMALE INPUT
MATERIAL 15500 96000 HORMONE ADDE
LABOUR COST:
VARIABLE COST 7500 10500
CONTRIBUTION LOST 42500 59500
FIXED COSTS 0 0 W3:LOST CONTRIBUTION
SUPERVISOR 0 0 HOURS RE FOR 1000 L
65500 166000

INCREMENTAL PROFIT 6040 -5080

BENEFIT COST

BASED ON THE FINANCIAL DATA IT WOULD BE ADVISAVLE TO FURTHER PROCESS

HOWEVER 6040 IS NOT A SUBSTANTIAL AMOUNT OFO INCREMENTAL PROFIT

ANY CAHNGES IN DEAND MAY AFFECT THE OUTPUT AND THE RPODUT MAY BECO

IF THE PRODUCT VBECOMES POPULAR THE CO MAY EXPECT TO INCREASE THE PRICE CHARGES AND HENC EMAY E BALE TO
RESOLVING THE LABOUTR SHORTGAE WOULD IMPROVE TGE LABOR COST IN REDUCINF

belton park

1.THE HOTEL

AVAILABLE OCCUPANCY 3720

ESTIMATED OCCUPANCY 1860

REVENUE FROM ROOMS 130200

CONTRIBUTION FROM EXTRAS 22320

STAFF COSTS:W1 89833

MAINTENANCE COSTS 10600
power costs:w3 14700
security costs 0
water costs 6450
121583 121583
net cash flow 30937
water park
number of visitors 5760
price 16.8
avg spend on extras 12
contribution margin 60%

revenue from visitors 96768

extras contribtuion 41472

inflows 138240

staff costs: 75600

less manager salary -2000 0
temporary staff salary 73600
decrease in hours 38272
staff costs 35328 35328

maintenance costs
if opened 6000
if closed 2000
4000 4000

power costs: 18000

less electricity -7000 0
11000
fixed charge for gas -1500 0
9500
increase of 50% 4750
incremental power costs 14250

security 0

water costs 12100

65678

net flow 72562

Q170
A)

OPTIMUM PRODUCTION MIX LIES ON THE POINT B AS ITS WHERE THE ISO CONTRIBUTION LINE IS THE FARTHEST WITHOU
LINE T AND LINE F INTERSECT ON THE POINT B AND THERFORE THEY ARE THE LIMITING CONSTARINTS

THE EQUATIONS ARE

7W+5L 3500 EQ 1
2W+2L 1200 EQ 2

MULTIPLY EQ 2 BY 3.5
7W+7L 4200
7W+5L 3500
2L 700
L 350

SUBSTITUNG L IN EQ 1

7W 1750
W 250

350 UNITS OF L AND 250 UNITS OF W SHOULD BE PRODUCED TO GET THE MAXIMUM CONTRIBUTION

CONTRIBUTION 48W+40L
MAXIMUM CONTRIBUTIN 26000

B)
SHADOW PRICE FOR FABRIC

7W+5L 3500 EQ 1
2W+2L 1201 EQ 2

EQ 2 MULTIPLIED BY 3.5
7W+7L 4203.5
7W+5L 3500
2L 703.5
L 351.75

SUBSTITUING IN EQ 1
7W 1741.25
W 248.75

CONTRIBUTION 26010
OLD CONTRIBUTION 26000
SHADOW PRICE 10 PER METRE

SHADOW PRICE FOR TAILOR

7W+5L 3501 EQ 1
2W+2L 1200 EQ 2

EQ 2 MULTIPLIED BY 3.5
7W+7L 4200
7W+5L 3501
2L 699
L 349.5

SUBSTITUING IN EQ 1
7W 1753.5
W 250.5

CONTRIBUTION 26004
OLD CONTRIBUTION 26000
SHADOW PRICE 4 PER HOUR

WORKING EXTRA HOURS COULD REDUCE THE QUALITY OF THE SUITS AS THEY ARE LIEY TO BE TIRED.THIS COULD RESLT I A
THE TAILORS HAVE OFFERED TO WORK OVERTIME FOR 4.50 PER HOUR WHICH MEANS THAT A PREMIUMOF 3 IS ASKED BY
IF THE TAIORS WORK 500 HOURS EXTRA THIS WILL EARN A CONTRIBUTION OF (500*4) 2000 EXTRA IN ADDITION TO THE E
THE INCREMENTAL LABOUR COST WILL BE 3*500 WHICH IS 1500.WHICH LEAVES ACONTRIBUTION OF 500.
CS SHOULD ACCEPT THE OFFER AS THE PREMIUM ASKED FOR BY THE TAILORS ARE LESS THAN THE INCREASE IN CONTRIBU
SHADOW PRICE IS THE PREMIUM THAT THE COMPANY WOULD BE WILLING TO PAY FOR AN EXTRA HOUR OF LABOUYR

D)
IF THE DEMAND FOR W FALLS TO 200 THE FEASIBLE REGION WOULD CHANGE
AS THIS WILL BE THE POINT WHERE THE ISOCONTRIBUTION LINE IS THE FARTHEST FROM THE ORIGIN

W 200 EQ 1
2W+2L 1200 EQ2

EQ 1 IN EQ 2
2L 800
L 400

THE NEW PLAN WOULD BE TO PRODUCE 400 UNITS OF L AND 200 UNITS OF W

alka hotel

a)
AVAILABLE OCCUPANCY 9125
BUDGETED OCCUPANCY 6387.5

RATE PER NIGHT 180

VARIABLE COST PER NIGHT 60

REVENUE PER ROOM 180

VARIABLE COSTS 60
CONTRIBUTION 120

FIXED COSTS 600000

BEP OF ROOMS 5000

MARGIN OF SAFETY 1387.5
MOS PERCENTAGE 21.72211350294

B)
EXPECTED OCCUPANCY IN Q1 900
FIXED COSTS 150000

REVENUE 162000
VARIABLE COSTS 54000
CONTRIBUTION 108000
FIXED COSTS 150000
LOSS -42000

IF THE HOTEL CLOSES THE LOSS WOULD BECOME 150000.THEREFORE IT SHOULD NOT CLOSE AS PART OF THE FIXED COST

C)

RATE FOR TWO NIGHTS 67.5

REVENUE FROM TICKET 50
117.5
VARIABLE COST ROOM FOR T 60
COST OF TICKET 47.5
107.5

CONTRIBUTION FROM 2 NIGH 10

PV RATIO 8.51%

FIXED COSTS 20000

BREAK EVEN REVENU 235000

NO OF CONSECUTIVE NIGHTS 2000

TOTAL NIGHTS TO BE OCCUPI 4000

AVAILABLE ROOMS IN QUARTER 1 2281.25

REQUIRED FOR USUAL 900
1381.25

AS THERE ASRENOT ENOUGH ROOMS TO BREAKEVEN THI SHOULD NOT BE ACCPETED

D)
MARGIN OF SAFETY IS 2139 ROOMS COMPARED TO THE 1387.5 ROOMS ASND HENCE HAS INCREASED
ROOM RATE HAS INCREASED TO 250 FROM180 AND THE VARIABLE COSTS FALLEN FROM 120 TO 95 HABE
FIXED COSTS 800000
BER 1290250
PVR 62%

CPU 155
VC PER UNIT 95

OCCUPANY RATE HAS INCREASED TO 80%

FIXED COTS HAVE INCREASED BY 200000

HMF CO

PRICE
400 450
120 560000 577500
160 480000 507500
VARIABLE COSTS 210 380000 420000
 DEMAND 2000 1750

B)
MAXIMAX DECISION WILL BE USED BY A RISK SEEKER.USING THIS TECHNIQUE THE OPTION WITH THE HIGHEST OF THE BES
FROM THE ABOVE QUESTION, THE BEST OUTCOMES ARE 560000,577500 AND 570000 RESPECTIVELY FOR THE PRICES 400

MAXIMIN DECISION RULE IS USED BY A RISK AVERSE USER.HERE THE BEST OF THE WORST OUTCOME IS CHOSEN TO MINI

PRICE 400 450 500

MIN VALUE 380000 420000 435000

HER THE BEST OUTCOME IS 435000 AND THERFORE PRICE 500 WILL BE CHOSEN.

MINIMAX REGRET

HERE A REGRET TABLE IS FORMED FIRST TO FIND THE REGRETS.THEN THE MAXIMUM REGRETS OF THE OUTCOMES ARE C

REGERRT TABLE

400 450 500

120 17500 0 7500
160 30000 2500 0
210 55000 15000 0

MAX REGRETS 55000 15000 7500

MIN AMONG THEM 7500

THEREFORE PRICE 500 WILL BE CHOSEN

C)
EXPECTED VALUE IS A LONG WEIGHTED AVERAGE OF THE PSOOIBLE OUTCOMES IF THE DECISIONS ARE REPAETED MULTIP
HOWEVER FOR HMF TO ISE THAT TECHNIUQ THEY WILL NEED TO KNOW THE POSSIBILITY OF THE VARABLE COST OCCURIN
THERE IS ALSO A RIS THAT HE EXPECTED VALUE MAY NEVER OCCUR AS ITS AN AVERAGE OF THE POSIIBLE OUTCIES.ALSO A

SENSITITY ANSLSIS COULD E USED TO FIND THE CRITICAL VARIABLES THE HM CO SHOULD FOCUS ON.THE LOWER THE PER
HOWEVER IT DOESNOT PROVIDE THE MANAGEMENT WITH THE BEST DECISION TO TAKE BUT THE INFOERMATION ON WH

XPECTED VALUE IS CALCULATED BY MULTIPLYING THE POSSIBLE OUTCOME EITH ITS PROBABILKITIES.WHEN THERE ARE A

GAM CO

PRICE 30 PROBABILITY
 PROFIT
SALES VOLUME 120000 930000 0.4
110000 740000 0.5
140000 1310000 0.1

PRICE 35
PROFIT
SALES VOLUME 108000 1172000 0.3
100000 880000 0.3
94000 742000 0.4

B)
EXPECTED VALUE OF PROCE 30 873000
EV OF 35 912400

HERE THE HGHES EV IS 912400 AND THERFORE PRICE 35 WILL BE SLECETED

C)
MINIMUM PROFITS OF PRICE 30 AND 35 ARE 740000 AND 742000 AND THE BEST OF THESE IS 742000 THERFORE PRICE 35

PRICE 30

SALES VOLUME 120000 110000 140000

SELLING PRICE 30 30 30
VARIABLE COSTS -11 -11 -11
CONTRIBUTION 2280000 2090000 2660000
FIXED PRODUCTION COSTS -450000 -450000 -450000
ADVERTISING COSTS -900000 -900000 -900000
PROFIT 930000 740000 1310000

PRICE 35
SALES VOLUME 108000 100000 94000
SELLING PRICE 35 35 35
VARIABLE COSTS -11 -12 -12
CONTRIBUTION 2592000 2300000 2162000
FIXED PRODUCTION COSTS -450000 -450000 -450000
ADVERTISING COSTS -970000 -970000 -970000
PROFIT 1172000 880000 742000

CARDIO CO
A

T C R
SELLING PRICE 1600 1800 1400
VARIABLE COST 628 716 531
CONTRIBUTION PER UNIT 972 1084 869

PV RATIO 60.75% 60.22% 62.07%

UNITS 420 400 380

SALES MIX 672000 720000 532000

WEIGHTED AVERAGE PV RATI 60.9%

B)
FIXED COSTS T C R
GENERAL
LABOUR 55440 57600 43320
TOTAL FIXED COSTS

BREAKEVEN REVENUE 346959

TOTAL REVENUE 1924000

MARGIN OF SAFETY 1577041

C)
THE CHART SHOWN IS A BREAKEVE POINT CHART
AXIS LABELS X AXIS SHOWS THE NO OF UNITS,Y AXIS SHOWS THE AMOUNT OF REVENUE AND COSTS
POINT A IS THE BREAKEVN POINT LENGTH B IS THE MARGIN OF SAFETY IN REVENUE LENGTH C IS THE PROFIT LINE D TOTA

D)
IF PRODUCTS WERE SOLD IN THE ORDR OF PROFITABILITY THE BREAK EVEN POINTS WOULD BE REACHED EARLIER AS THE
THE BREAK EVEN POINT WILL BE LOWER AS A RESULT
EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND

E)LIMITATIONS OF CVP
IT ASSUMES THAT THE VARIABLE COSTS WILL REMAIN SAME ACROSS THE PERIODS.THS MAYNOT BE THE CASE AS BULK DI
IT ALSO ASSUMES THAT FIXED COST DONOT CHANGE AS WELL.THIS WWILL NOT BE TRUE ALWAYS AS SOME ELEMENTS OF
IT ALSO ASSUMES THAT SELLING PRICE REMAINS COMSTANT WHICH ISNOT RUE AS WELL.CO MAY TRY TO REDUCE THE SE
IT ALSO ASSUMES THAT THE SALES QUANTITY IS EQULA TO THE PRODUCTION QUANTITY AND THERFORE DOESNOT ACCO

TR CO

VARIABLE COSTS:
MATERIAL Z 50
MATERIAL Y 150
MACHINE TIME 2
LABOUR-W1 6.603951972499
208.6039519725

marginal revenue 208.6039519725

MR A-2BQ

B 0.0004

A 400

TO FIND THE OPTIMUM QUANTITY,

2BQ 191.3960480275
Q 239245

OPTIMUM PRICE A-BQ

304.30

SALES 72802745
VARIABLE COSTS 49907465
CONTRIBUTION 22895280
FIXED COSTS 500000
PROFIT 22395280

UNITS AVG TIME TOTAL TIME INCREMENTAL TI

1 5 5
2 4 8.0 3.0
4 3.2 12.8 4.8
8 2.6 20.5 7.7
16 2.0 32.8 12.3
32 1.6 52.4 19.7
64 1.3 83.9 31.5
128 1.0 134.2 50.3
256 0.8 214.7 80.5
512 0.7 343.6 128.8
 1024 0.5 549.8 206.2

B)
MARKET PENTRTAION STARTEGY INVOLVES CHARGING LOWER PRICE WHEN THE PRODCUT IS INODUCED INOT THE MARK
IT FOCUSES ON FGAINING A,RKET SHARE AND INCREASING THE SALES VOLUME BY REDUCING THE PRICES.
ITS SUITABLE WHERE THERE ARE NO BARRIERS FOR NEW ENTARNTS INTO THE MARKET.IN THIS CASE THERE ARE NO SIML

MARKET SIMMING

THISINVLOVES CHARGINGA HIGHER PRICE WHEN THEPRODUCT IS INTRODUCD INTO THE MAREKT AS THE FISRT USERS AR
THIS METHOD CAN BEUSED WHEN THERE ARE SIGNIFANT BARRIERS OF ENRY APETNT AND THE LACK O SIMAT PRODYS
THIS OPTION IS ALOSO USFEUK WHEN THE DEMAND FORE THE PRODYCT IS UNKNOWN AS THIS ENALE TO THE CIMOANY T

WHE THE DEMAND LEVELS ARE KNOWN LATER THE PRICE CAN BE REDUCED AS IS EASIER TO REDUCE PRICE ATH NINCREA

RECOMMENDATION
IT WOULD ABE ADVSIABLE TO FOOWE THE SKIMMING STARTEGY DUE HE REASNPROVIDED

ROBBER CO

KEYPADS DISPLAY SCREENS

COST TO BUY 328000 344000

COST TO MAKE INHOUSE

DIRECT MATERIALS 164000 118320

DIRECT LABOUR 40000 60000
HEAT AND POWER COSTS-W1 44000 58000
MACHINE COSTS-W2 31500 36000
DEPRECIATION AND INSURAN 33600 38400
incremental costs 313100 310720

EXTRA COST TO BU OUTISDE 14900 33280

THERFORE SHOULD MAKEBOTH INSIDE

PER UNIT 3.91375 3.884

B)

KEYPAD DISPLAY SCREEN

COST TO BUY 4.1 4.3
COST TO MAKE INHOUSE 3.100 2.954
COST SAVED IF MADE INHOUS 1.000 1.346

LABOUR HOURS PER UNIT 0.5 0.75

COST SAVED PER UNIT OF LA 2.00 1.79

RANK TO MAKE INHOUSE 1 2
HRS UNITS
AVAILABLE HOURS 100000
keypad 50000 100000
50000
screen 50000 66667

remaining 33333 should be purchased

THE REMAININ 50000 OF KEYPADS SHOULD BE PURCHASED FROM OUTSIDE BY THE COMPANY

as we will make atleast 1 units of each the fixed cost will be incurred anywas
therefore they are not relevant to the decisions

variable costs 248000 236320

3.1 2.954

c)
robber co should consider what he custmers reaction would be when the components are outsourcd as some customers m
also if the quality lacks in the iutsoucred ciponets this could increase the warranty costs and lead to dmage of the repuatio
they should cosnder whether the suppier is reliable for quality on time delivery and at reasonable prces
if they arent reiable this ould toed to heldu in pridyuction and might affect the image of the company
there isa potetial for the loss of control over the processes

the price is guarenteed for two years,theis cild be increased later on by the company.the company should seek out alterna
CLOSED

0 SHOULD NOT CLOSS

150000 FC WILLNOT BE DELETD
-150000

OTHER FIXED COSTS WILL BE INCURRED ANYWAYS

1000 COUPLES NEEDED

X2 ROOMS 2000
OT SUSE THE OCCUPANCY AS ITS FOR REVENUE FINDING

LABILITY IS NOT BASED ON OCCUPANCY

SOLD ROOMS 7300

BUDGETED OCCUPANCT 6387.5

TOTAL C FC PROFIT
2280 1350 930
2090 1350 740 30
2660 1350 1310
2592 1420 1172
2300 1420 880 35
2162 1420 742

35 WILL BE CHOSEN
HE DECISIONS ARE COSDERED AND THEN THE MAXIMUM OF THOSE VALUES ARE SELECTED TO CHOOSE THE PRICE

PROBABILITY WII NOT BE CONSIDERED

35 WILL BE CHOSEN

1924000

55000

156360
211360
CUM UNIT AVG TIME TOTAL TIME INCREMENTAL TI
1 5 5
2 4 8 3
4 3.2 12.8 4.8
8 2.56 20.48 7.68
16 2.048 32.768 12.288
32 1.6384 52.4288 19.6608
64 1.31072 83.88608 31.45728
128 1.048576 134.217728 50.331648
256 0.8388608 214.7483648 80.5306368
512 0.67108864 343.59738368 128.84901888
1024 0.536870912 549.755813888 206.158430208

400
0.0004

A
he launch is eagerly anticiapted oevr the wold.

g initially when the product is introduced in the market.This will help them to recover the initail investmett in the project quickly.
ctuing the same drug,new entratns are discouraged.This allows th eo to charge higher price without lsoing the slaes to competitors.

adopt market skimming price

rnats and aslo when the co wants to increase the slaes volume and the makret share

ow.resulting in lower slaes and income.This will prevnt them from recovering the initial invetsmet in the drug ad tus casue a loss

MACHINE

26 30
FC 4 6
VC 22 24
BATCHES 160 160
0.1375 0.15
NEW BATCHES 200 200
27.5 30
TOTAL

15060
12000
3060

TOTAL

RESOURCE UTILI GRAMS UNITS

AVAILABLE BETTA 12000
SHAKES -ENCOMP 5000 5000
 7000
48358 COOKIES 1960 9800
5040
3000 CAKES 5040 10080

45358

CE MORE SHAKES AND SELL AT THE RATE OF 6 PER SHAKE,THERE IS A CHAME THAT THE BENEFITS FROM BREACHING THE GAREEMENT

COMPASS HELATH

ANY POINT THE CONTRIBUTION WILL BE EQUAL

CTION PLAN LIES AT THE EDGES OF THE FEASIBLE REGION.

BY ANY PRODUCTION PLANS SLECETED

TH THE SLOPE BEING THE SAME.THE LAST POINT THE LINE TOUCHES WITHOUT LEAVING THE FEASIBLE REGION IS THE OPTIMUM POIN

IS REQUIRED FOR THE OPTIMUM PRODUCTION PLAN

TO BE THE LINE ON WHICH THE OPTIMUM POINT OCCURS

net cost discount gross cost

1010000 5% 1063158
-60000 -63158
 -18421.0526316
-31578.9473684
921500 3% 950000

88499.9999999999

SIDER WHETHER THE INCREMENTAL INCOME FROM THE FURTHER PROCESSED PRODUCT IS GREATER THAN THE INCREMENTAL COST
CCEPTED BU THE MARKET .IF THE COST EXCEEDS THE BENFIR THEY SHOULD NOT APROCESS IT FURTHER.

15500
96000

7500
10500

102000
0
0
231500

E FURTHER PROCESSED

MALE VERSION
200 L
2L
 202

EMALE VERSION
800 L
8L
808

OST CONTRIBUTION
RS RE FOR 1000 L 2000 HR
FOR 1L 2 HR

SELLING PRICE 399.8

MATERIAL COST 19.8
180
LABOUR 30
CONTRIBUTION 170 PER L

LOST HOURS 1200

LOST LITRES 600
LOST CONTRIBUTION 102000
ASE THE PRICE CHARGES AND HENC EMAY E BALE TO INCREAE THEIR PROFIYS
OST IN REDUCINF

WORKINGS

W1
TOTAL 120000
HOTEL MANAGER -2500
HEAD CHEF -2000
115500
UNAFFECTED 57750

REMAINING 57750
32083

89833

w3:power costs

total 20000
fixed electricity 8000
12000
gas 12000
fixed charge -2200
9800
increase 14700
ISO CONTRIBUTION LINE IS THE FARTHEST WITHOUT LEAVING THE FEASIBLE REGION
RE THE LIMITING CONSTARINTS

THE MAXIMUM CONTRIBUTION

AS THEY ARE LIEY TO BE TIRED.THIS COULD RESLT I ADERSE IMPACT ON THE PROFITAILT OF THE COMPANY
R WHICH MEANS THAT A PREMIUMOF 3 IS ASKED BY THEM.
TION OF (500*4) 2000 EXTRA IN ADDITION TO THE EXISTING CONTRIBUTION.
CH LEAVES ACONTRIBUTION OF 500.
TAILORS ARE LESS THAN THE INCREASE IN CONTRIBUTION.
LLING TO PAY FOR AN EXTRA HOUR OF LABOUYR

E FARTHEST FROM THE ORIGIN

IT SHOULD NOT CLOSE AS PART OF THE FIXED COSTS ARE COVERED BY THE CONTRIBUTION
 T BE ACCPETED

MS ASND HENCE HAS INCREASED

STS FALLEN FROM 120 TO 95 HABE

500
570000
510000
435000
 1500

HNIQUE THE OPTION WITH THE HIGHEST OF THE BEST OUTCOMES IS CHOSEN AND HENCE MAXIMISING THE MAXIMUM.
00 AND 570000 RESPECTIVELY FOR THE PRICES 400 450AND 500.HERE THE HIGHEST VALUE IS 577500 AND THEREFORE PRICE 450 WIL

BEST OF THE WORST OUTCOME IS CHOSEN TO MINIMISE THE RISK.

THE MAXIMUM REGRETS OF THE OUTCOMES ARE CHSOEN AND THE ONE WITH THE LEAST REGRET AMONG THEM IS SELECTED.

UTCOMES IF THE DECISIONS ARE REPAETED MULTIPLE TIMES.IT REDUCES THE IUTCOME TO A SINGLE NUMBER AND HENCE MAKES DE
W THE POSSIBILITY OF THE VARABLE COST OCCURING.
S ITS AN AVERAGE OF THE POSIIBLE OUTCIES.ALSO AS THIS IS LIEY TO BE ONE OFF DECISION THE TECHNIQUE ISNOT REALLY USEFUL AS

HE HM CO SHOULD FOCUS ON.THE LOWER THE PERCENTAGE THE GREATER THE SENSITIVITY AS THE VARIABLE NEEDS TO CHANGE BU
DECISION TO TAKE BUT THE INFOERMATION ON WHICH DECISION CAN BE TAKEN

OME EITH ITS PROBABILKITIES.WHEN THERE ARE A NUMBER OF OPTIONS ITH A RANGE OF OUTCOMES,THE OPTIMUM DECISION WOU
D THE BEST OF THESE IS 742000 THERFORE PRICE 35 WILL BE CHSOEN
 1924000

55000
156360
211360

OUNT OF REVENUE AND COSTS

Y IN REVENUE LENGTH C IS THE PROFIT LINE D TOTAL SALES LINE E TOTAL COSTS LINE F FIXED COSTS

EVEN POINTS WOULD BE REACHED EARLIER AS THE CONTRIBUTION FROM THE PROFITABLE PRODUCTS WILL COVER THE FIXED COSTS

IER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER

THE PERIODS.THS MAYNOT BE THE CASE AS BULK DISCOUNTS MAY BE AVIALBE FOR PURCHASES.
WILL NOT BE TRUE ALWAYS AS SOME ELEMENTS OF FXED COSTS MAY VARY FOM EROD TO PERIOD
SNOT RUE AS WELL.CO MAY TRY TO REDUCE THE SELLING PRICE T ATRACT MRE CUSTOMERS OR MAY BE WILLING TO OFFER DISCOUN
UCTION QUANTITY AND THERFORE DOESNOT ACCOUNT FOR THE STORAGE OF INVENTRY

WORKINGS
W1:LABOUR

RATE 18

TIME TO MAKE 1ST BATCH 5 HR

LEARING CURVE 80%

AVG TIME TO MAKE 1000 BATCHES 0.540985618063

total time 540.9856180626

avg time to make 999 units 0.541159891734

total time 540.6187318419

time to make 1000th unit 0.367 hour

labour cost per unit 6.603951972499

y99 0.373008338477
y100 0.372438935344
100th

49900
100

INCREMENTAL UNITS

1
2
4
8
16
32
64
128
256
 512

WHEN THE PRODCUT IS INODUCED INOT THE MARKET.

VOLUME BY REDUCING THE PRICES.
NTO THE MARKET.IN THIS CASE THERE ARE NO SIMLAR DRUGS EXISIMG AND THE CO HAS A ATENT WHICH ACTS A BARRIER.THEROF M

RODUCD INTO THE MAREKT AS THE FISRT USERS ARE LILEY TO PAY HIGHER AMOUNTS FOR THE PRODUCT.THIS METHOD IS SUITABLE
F ENRY APETNT AND THE LACK O SIMAT PRODYS
CT IS UNKNOWN AS THIS ENALE TO THE CIMOANY TO AMXIMSE THE RETURN FROM THE INITIAL SALES.ALOS IT ALLOS THEM TO RECO

UCED AS IS EASIER TO REDUCE PRICE ATH NINCREASE THEM

HE REASNPROVIDED

AY SCREENS WORKINGS
W1: HEAT AND POWER COSTS

KEYPADS
TOTAL 64000
GENERAL APPOR 20000
44000

W2: MACHINE COSTS

KEYPADS
TOTAL 26000
FIXED COSTS 4000
VARIABLE COSTS 22000
BATCHES CURRNT 160
VC PER BATCH 137.5

NEW NO OF BATC 200

NEW VC 27500
SPECIFIC FIXED C 4000
31500
 W3:DEPRECIATION AND INSURANCE
KEYPADS
TOTAL 84000
GENERAL 50400
SPECIFIC 33600

TSIDE BY THE COMPANY

he components are outsourcd as some customers may orefer in house manufayirn.this could lead to potential loss of sales and affect
he warranty costs and lead to dmage of the repuation of the company.
delivery and at reasonable prces
ffect the image of the company

y the company.the company should seek out alternative suppliers or agree a price fix for a longer term
PROB
0.4 873
0.5
0.1
0.3
0.3
0.4 912.4
D TO CHOOSE THE PRICE

BE CONSIDERED
INCREMENTAL UNITS

1
2
4
8
16
32
64
128
256
512
initail investmett in the project quickly.
e without lsoing the slaes to competitors.

etsmet in the drug ad tus casue a loss

NEFITS FROM BREACHING THE GAREEMENT MAY BE ECEEDED BY THE PENLAY THAT COULD BE INCURRED.A;SO ITS LIKLEY T BE LONG T

HE FEASIBLE REGION IS THE OPTIMUM POINT.HERE IT IS THE POINT C

S GREATER THAN THE INCREMENTAL COST INCURRED FOR THE FURTHER PROCESSING OF THE JOINT PRODUCTS.
S IT FURTHER.
 A

1 ML 0.3998
1000 ML 399.8
1L 399.8
F THE COMPANY
MAXIMISING THE MAXIMUM.
E IS 577500 AND THEREFORE PRICE 450 WILL BE CHOSEN

REGRET AMONG THEM IS SELECTED.

O A SINGLE NUMBER AND HENCE MAKES DECISION MAKING EASIER.

N THE TECHNIQUE ISNOT REALLY USEFUL AS THE DEISON CAT BE REPEATED MANY TIME SOVER.ALSO IT IGNORES THE DEVIATIONS FRO

TY AS THE VARIABLE NEEDS TO CHANGE BU ALOWER AMOUNT TO MAKE THE PROJECT NOT WORTHWHILE

OUTCOMES,THE OPTIMUM DECISION WOULD BE THE ONE WITH THE HIGHEST EV OF PROFITABILTIY.
E PRODUCTS WILL COVER THE FIXED COSTS SOONER.

AND LOWER EARLIER AND LOWER EARLIER AND LOWR EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWER EANRLIER AN
RS OR MAY BE WILLING TO OFFER DISCOUNTS

toit
36.927825509
37.243893534
0.316068025

15771.794458887
37.243893534
15809.038352421 0.316181 10.96199
548099.359678441
10.961987194
 ATENT WHICH ACTS A BARRIER.THEROF MARKET PENETRATION IS NOT A SUITABLE IDEA

R THE PRODUCT.THIS METHOD IS SUITABLE IF THE PRODUCT IS NEW AND UNIQUE.WHICH IS THE CASE WITH THE ANTIMALARIA DRUG

NITIAL SALES.ALOS IT ALLOS THEM TO RECOVER THE INITIAL INVESTMENT MADE I DEVELOPING THE PRODUCT

DISPLAY SCREENS
88000
30000
58000

DISPLAY SCREENS
30000
6000
24000
160
150

200
30000
6000
36000
D INSURANCE
DISPLAY SCREENS
96000
57600
38400

uld lead to potential loss of sales and affect proftablity of the company

onger term
O ITS LIKLEY T BE LONG TERM CYSTMER SO POTENTIAL LOSS OF SALES IN GUTURE
RES THE DEVIATIONS FROM THE EXPECTED VALUES
AND LOWER EANRLIER AND LOWER EARLIER AND LOWER EARLIER ANDLOWER EARLIERANDLOWERR EARLIERANDLOWE EARLIERANDLO
THE ANTIMALARIA DRUG.THERE ARE NI SIMILAR PRODUCTS IN THE AMREKT.
RANDLOWE EARLIERANDLOWER EARLIERANDLOWER EARLIERANDLOWER EARLIER AND ALOWER EARLIERAND LOWER EARLIER AND LO
ND LOWER EARLIER AND LOWER EARLIER AND LOWER EARLIER AND LOWERR EARLIER AND LOWER EARLIER AND LOWER EARLIER AND
AND LOWER EARLIER AND LOWER