EXERCISE 1 Calculate BEP using 3 approaches for the following data

product unit price unit var cost prod capab unit sales overheads general exp
A 50 30 10000 8000 15000
B 55 40 4000 2000 10,000
C 60 50 6000 4000 15,000 13,000

(1) unit gross margin approach

(2) Segment BEP analysis
(3) Global product BEP analysis

UNIT GROSS MARGIN APPROACH

product unit price unit var cost prod capab unit sales overheads general exp
A 50 30 10,000 8,000 15,000
B 55 40 4,000 2,000 10,000
C 60 50 6,000 4,000 15,000 13,000
unit profit margin
product unit price unit sales sales rev sales struct
A 50 8,000 400,000 53.3%
B 55 2,000 110,000 14.7%
C 60 4,000 240,000 32.0%

contribution margins for products A, B and C

product price unit var cost unit contr margin
A 50 30 20
B 55 40 15
C 60 50 10

unit weighted average contribution margin

53.3% * 20 + 14.7% * 15 + 32.0% * 10 =

BEP =( 15,000 + 10,000 + 15,000 + 13,000 ) / 16.07 =

BEP(A) = 53% * 3,299 = 1,759 units

BEP(B) = 15% * 3,299 = 484 units
BEP(C )= 32% * 3,299 = 1,056 units
@method assumes a constant structure of sales revenues
SEGMENT BEP ANALYSIS

product unit contr marg % of total contr marg overheads general exp
A 20 20 / 45 = 44.44% 15,000
B 15 15 / 45 = 33.33% 10,000
C 10 10 / 45 = 22.22% 15,000 13,000
total 45

BEP(A) = ( 15,000 + 13,000 * 44.44% )/ 20 = 1,039 units

BEP(B) = ( 10,000 + 13,000 * 33.33% )/ 15 = 956 units
BEP(C )= ( 15,000 + 13,000 * 22.22% )/ 10 = 1,789 units
total BEP 1,039 + 956 + 1,789 = 3,783 units
GLOBAL PRODUCT BEP ANALYSIS

product max prod capab contr margin max contr margin

A 10,000 20 10,000 * 20 = 200,000
B 4,000 15 4,000 * 15 = 60,000
C 6,000 10 6,000 * 10 = 60,000
total x x x x x x 320,000

product max prod capab price max sales rev

A 10,000 50 500,000
B 4,000 55 220,000
C 6,000 60 360,000
total x x 1,080,000

gross margin ratio = 320,000 / 1,080,000 = 29.63%

What sales revenues are necessary to cover all fixed costs?

X * 29.63% = ( 15,000 + 10,000 + 15,000 + 13,000 )
X= 53,000 / 29.63%
X= 178,875 m.u.
EXERCISE 2
Calculate BEP using 3 approaches for the following data

product unit price unit var cost prod capab unit sales overheads general exp
A 40 20 20000 12000 15000
B 45 24 5000 4000 10000
C 50 30 7000 5000 12000 10,000

(1) unit gross margin approach

(2) Segment BEP analysis
(3) Global product BEP analysis
16.07

3,299