Management Consulting/INTERNATIONAL BUSINESS

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Question
VK Ltd a multi-product Company, furnishes you the following data relating to the year 2000.
First Half of the year   Second Half of the year
Sales   Rs. 45,000   Rs. 50,000
Total Cost   Rs. 40,000   Rs. 43,000
Assuming that there is no change in prices and variable costs and that the fixed expenses are incurred equally in the two half years periods calculate for the year 2000.

Q1. Marks each.

Answer
ANSWER
         
     FIRST HALF   SECOND  HALF   TOTAL      
         
SALES      45000      50000      95000      
         
TOTAL COST   40000      43000      83000      
         
         
NO  CHANGE   IN  UNIT PRICES          
         
NO  CHANGE  IN UNIT   VARIABLE  COSTS          
         
FIXED   EXPENSES  ARE  THE SAME  IN  BOTH  HALVES         
         
HENCE          
         
VARIABEL  COST   27000      30000      57000      
         
FIXED  COST   13000      13000      26000      
         
     40000      43000      83000      
         
         
         
         
1.   The Profit Volume ratio [pvr]
pvr=contribution/ sales
    =sales-variable cost / sales
    = 95000-57000/95000= 0.40
======================
2. Fixed Expenses=======26000
=======================
3. Break-Even Sales
Sales- variable = contribution  margin
Break even  sales= total annual  fixed cost
         ___________________
         Contribution margin/total sales
         =26000/  0.40
         =65000.

4. Percentage of margin of safety
 Subtract from the projected sales the amount of sales you need to break even. For example, if you anticipate sales of $95,000, but only need $65,000 to break even, subtract $65,000 from $95,000 to get a safety margin of $30,000.
 2
Divide the safety margin by the projected sales to find the margin of safety ratio. In this example, divide $30,000 by $95,000 to get 0.315.
   3
Multiply the margin of safety ratio by 100 to find the margin of safety percentage. In this example, multiply 0.315  by 100 to get an 3.15 percent margin of safety.  

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Leo Lingham

Expertise

management consulting process, management consulting career, management development, human resource planning and development, strategic planning in human resources, marketing, careers in management, product management etc

Experience

18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc

PLUS

24 years in management consulting which includes business planning, strategic planning, marketing , product management,
human resource management, management training, business coaching,
counseling etc

Organizations
PRINCIPAL -- BESTBUSICON Pty Ltd

Education/Credentials
MASTERS IN SCIENCE

MASTERS IN BUSINESS ADMINSTRATION

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