Unit 1: Cost-Volume-Profit Analysis Economics Worksheet With Answers - Cma311s Notes, 2010 Page 27
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27Solution to Activity 11
11.1
Income Statement
Amount
Percentage
Sales revenue
N$500 000
100%
Less: Variable costs
300 000
60%
= Contribution
200 000
40%
Less: Fixed costs
150 000
30%
= Net income
50 000
10%
11.2
Contribution = 40% of sales revenue
= 40% of N$425 000 (N$500 000 less 15%)
= N$170 000
Net income = Contribution – Fixed costs
= N$170 000 – N%150 000
= N$20 000
Therefore, net income has decreased by 60% (from N$50 000 to N$20 000)
11.3
Operating leverage factor = Contribution ÷ Net profit
= N$200 000 ÷ N$50 000
= 4
11.4
% increase in net income = % increase in sales x operating leverage factor
= 20% x 4
= 80%
Solution to Activity 12
12.1
Break-even point (in units) = Fixed costs ÷ Marginal income per unit
= N$60 000 ÷ N$24
= 2 500 tins
Break-even point (in N$) = 2 500 x N$40
= N$100 000
12.2
Required sales = (Fixed costs + Target profit) ÷ Marginal income per unit
= (N$60 000 + N$18 000) ÷ N$24
= N$78 000 ÷ N$24
= 3 250 tins
12.3
Incremental sales N$25 000. Incremental marginal income = N$15 000
Incremental fixed costs
=
8 000
Incremental net income
= N$ 7 000
Yes, he should convert this position because he will earn an extra N$7 000.
12.4.1 Operating leverage = Marginal income ÷ Net income
= N$72 000 ÷ N$12 000
= 6
12.4.2 Percentage increase in net income
= Percentage increase in sales x operating leverage
= 50% x 6
= 300%
27
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