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Case:

Global Company manufactures and sells two products, product A and product B. The total monthly fixed expenses of the company are Rs.480,000. Sales price per unit of product A and product B is Rs.100 and Rs.200 and variable cost per unit is Rs.50 and Rs.80 respectively. Global’s management has set the goal to achieve the sales revenue of Rs.2,600,000 in the following month. To achieve this target, following alternatives are available to the company:

  1. To sell 8,000 units of product A and 9,000 units of product B
  2. To sell 16,000 units of product A and 5,000 units of product B

 

Required:

  1. Calculate break-even point (in rupees) if Company chooses to opt alternative (i).
  2. Calculate break-even point (in rupees) if Company chooses to opt alternative (ii).
  3. Decide on the basis of net operating income that which alternative is better for the company. (mention the calculated figures of net operating income under both alternatives)
  4. Briefly discuss the reason of change in break-even point (in rupees) under both alternatives.


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cm ratio a awr b main 0.5 and .6 ati hai dono apotion main same hogi correct me please if I am wrong 

and please check the target profit calculation also 

Fixed Cost        480,000.00        480,000.00
Target Profit    2,600,000.00    2,600,000.00
Product A CM Ratio                     0.50 0.6
Sale To Earn Target Profit    5,680,000.00    4,813,333.33

Its wrong dear. 

Fixed cost / by CS Ratio= 480000/.50 = 960,000

Target Profit ka Formula Kia hai

Syed sajjad how you calculate CS Ratio 0.5 please tell the procedure?

  1. Calculate break-even point (in rupees) if Company chooses to opt alternative (i).

843243.24 rupees

  1. Calculate break-even point (in rupees) if Company chooses to opt alternative (ii).

891428.57 rupees

  1. Decide on the basis of net operating income that which alternative is better for the company. (mention the calculated figures of net operating income under both alternatives)

Ans:     case (i) is better than case (ii) as it has high profit.

(i)                  1,000,000 rupees

(ii)                920,000 rupees

 

  1. Briefly discuss the reason of change in break-even point (in rupees) under both alternatives.

As products of variable cost in both cases are different, so contribution margin also changes.

how to calculate

to find profit, see page-185 Q.2.

then by the help of these data
find break even sale is rupees formula on page 185.

may be u can get the answer.
hope u understand

thanks dear

Q.3 how to calculate net operating income 

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