A profit/volume (P/V) chart of two companies (A and B) for a period follows:
A profit/volume (P/V) chart of two companies (A and B) for a period follows:
By reference to the above chart, justify your conclusion to:
a. 1. Estimate the break-even sales revenue of Company A.
ii. Estimate the total fixed costs of Company A.
iii. State which company has the higher contribution/sales ratio.
Iv. Estimate the level of sales at which the profit of the two companies is the same.
b. Calculate the contribution/sales ratio of Company A and use this to confirm, by calculation, the break-even point identified in Question 4 (a)(i) above.
Homework Answers
a.i. Break-even sales revenue for Company A = RM400,000
a.ii. Total Fixed Costs for Company A = Around RM180,000 (Image is not clear)
a.iii. Company B has a higher C/S Ratio
This is because its fixed costs and break-even sales are lower.
a.iv. Level of sales at which profit of two companies are same = RM475,000
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