CASE 28 (Chapter7)_BEP_Questions

INCOME STATEMENT PRODUCT "A"

Concepto Debe Concepto Haber
Raw Materials 820,000 Net Sales 5,000,000
Salaries 1,430,000
Energy Supply 250,000
Delivery Costs 40,000
Sales Commissions 300,000
Structure Costs 1,700,000
Result 460,000

TOTAL 5,000,000 TOTAL 5,000,000

1.A) Break-Even Point:

Net Sales 5,000,000

Raw Materials 820,000

Salaries 1,430,000
Energy Supply 250,000
Delivery Costs 40,000
Sales Commissions 300,000

Variable Costs 2,840,000 56.80%

Contribution Margin 2,160,000 43.20%

Structure Costs 1,700,000

Result 460,000

Break-Even Point 3,935,185

Ckecking (of the BEP)

Sales Break-Even Point 3,935,185

Variable Costs -2,235,185

Contribution Margin 1,700,000

Structure Costs 1,700,000

Result 0

1.B) BEP Management Rates:

Safety Margin on Sales SALES - BEP 21.30%
(Indice Eficiencia comercial) SALES
Coverage Fixed Costs BEP 78.70%
(Indice Absorción Costes Fijos) SALES
Variable Costs Safety Ratio NET INCOME 16.20%
(Indice Seguridad costes proporcionales) VARIABLE C.
Structure Costs Safety Ratio NET INCOME 27.06%
(Indice Seguridad cargas estructura) STRUCTURE C.
 PRODUCT "B"

Unit Selling Price 5,000

Variable Costs on Selling Pr 60%
Structure Costs 2,000,000

2) Break-Even Point with Fiscal Effect

Investment 3,000,000
Target on Investment (after Taxes) 20.00%
Corporate Tax Rate 25.00%

100.00% - 25.00% =

Net Income = Target after taxes = 600,000 (Invesntment x 20%)

EBT= Profits before Taxes = 800,000 (Profit after taxes or Net Income / 25%)

Break-Even Point 5,787,037 (EBT Target + Structure Cost) / Contribution Margin

Ckecking (of the target)

Sales Break-Even Point 5,787,037

Variable Costs -3,287,037

Contribution Margin 2,500,000

Structure Costs 1,700,000

EBT 800,000

Taxes 200,000

Net Income 600,000 10.37%

 3) Break-Even Point: Product "B"

Unit Margin
5,000 - 3,000 = 2,000

Break-Even Point (units)

75.00%
FIXED COST 2,000,000
= = 1,000 units
UNIT MARGIN 2,000

ncome / 25%)

ost) / Contribution Margin 4) Break-Even Point: Product "B" & Selling Price decrease

Selling Price Decrease…………………………….-10.00%

Structure Costs Increase …………………………….
400,000
New Variable Costs per Unit……………………… 3,000
New Selling Price……………………………………….. 0

Unit Margin
4,500 - 3,000 = 1,500

Break-Even Point (units)

2,000,000 + 400,000
= 1,600 units
1,500
CASE 29 (Chapter7)_BEP PORTFOLIO_Question

BREAK-EVEN POINT ANALYSIS

BREAK-EVEN POINT WITH 1 PRODUCT

1) Calculate the break even point of Product A:

Net Income EXPECTED 0
Fixed
Fixed Costs
Costs
Unit Selling Price 125
Break Even Point Units=
Unit Selling Price - Unit
Unit Variable
Variable Cost
Cost
Unit Variable Cost 75
Fixed Cost 2,000,000
Fixed Costs
Break Even Point €=
Break-Even Point (units) 40,000 units Variable Costs
1-
Break-Even Point (euros) 5,000,000 euros 0.00 Sales

2) Calculate the break even point of Product A to get a Net Income of 500.000 euros:
Net Income EXPECTED 500,000
666,667 Increase of:
Break-Even Point (units) 53,333 Units 33.33%

Break-Even Point (euros) 6,666,667 euros 33.33%

BREAK-EVEN POINT WITH SEVERAL PRODUCTS

3) Calculate the break even point with the new portfolio:

Fixed Costs 2,000,000 euros

Producto A B C MIX
% over total units sold 50.00% 30.00% 20.00% 100.00%
Unit Selling Price 125 90 95 109
Unit Variable Cost 75 70 45 68
Contribution Margin 50 20 50 41

BREAK-EVEN POINT A B C MIX

BEP Units 24,390 14,634 9,756 48,780
BEP € 3,048,780 1,317,073 926,829 5,292,683

Checking

CONCEPT A B C TOTAL
Net Sales 3,048,780 1,317,073 926,829 5,292,683
- Variable Costs -1,829,268 -1,024,390 -439,024 3,292,683
Contribution Margin 1,219,512 292,683 487,805 2,000,000
- Fixed Costs -2,000,000
Net income 0