nd t Practical exercise 3. (35 points) Define a break-even point (monetary) for

Question

nd t Practical exercise 3. (35 points) Define a break-even point (monetary) for a (shop of clothes) which the assortment of commodity is wide and prices 04050. believ the ta sale enterprise on different commodity groups are different. Total Revenue of shop makes $ 59 Information about fixed cost and variable cost is presented in a table: Variable cost Fixed cost 1200 205500 Purchase price (middle) 50500 Volume of sales, unit. (planned) 50500 25500 20000 1050 Expenses on a lease Payment of salespeople Deductions from an Payment Expenses on public utilities Expenses on advertising Define the margin of financial safety for this shop.

Explanation / Answer

Total revenue = $5904050

Variable cost:

Purchase price = $1200

Volume of sales, unit = 1050

Hence, total variable cost = 1200 x 1050

= $1260000

Contribution margin = Total revenue - Total variable cost

= 5904050 - 1260000

= $4644050

Contribution margin ratio = Contribution/Total revenue

= 4644050/5904050

= 78.66%

Fixed cost:

Expenses on a lease = $205500

Payment of sales peaople = $150500

Deductions from payment = $50500

Expenses on public utilities = $25500

Expenses on advertising = $20000

Hence, total fixed cost = $452000

Break even sales = Fixed cost/Contribution margin ratio

= 452000/78.66%

= $574625

Margin of safety = Present sales - Break even sales

= 5904050 - 574625

= $5329425

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