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Exhibit 1
First of all
Fixed Cost needs to be calculated from the given data;
Contribution =35%,
Total Sales Volume = $12 Million (2004)
Profit before Tax = $1,140,000.
Now,
Profit = Contribution * Total Sales Fixed Cost
Fixed Cost = Contribution * Total Sales- Profit
= 0.35* $ 12 million - $1,140,000
= $3,060,000
Breakeven Point = Total Fixed cost / Contribution per sales
= 3060000/0.35
=$ 8,742,857.143
Breakeven Margin= Break even sales for J.B / total market share
= (8,742,857.143 / 80000000)*100
= 11% approx.
Now for the Operation view:
Contribution Margin = 20% down so now it is 80 %
New contribution margin = 0.35* 0.80
= 0.28
Fixed Cost = $3,060,000
Breakeven Point = total fixed cost / contribution per sales
=3060000 / 0.28
=$ 10,928,571.43
Breakeven Margin= Break even sales for J.B / total
market
= (10928571.43 / 80000000)*100
= 13.67 % which is 2.67 % higher
than original one.
Now for the finance view:
Fixed Cost = $3,060,000
Additional Manpower Expense = $60,000
Total Fixed Cost = $ 3,120,000
Breakeven Point =
total fixed cost /
contribution per sales
= 3120000 / 0.35
= $ 8,914,285.71
Breakeven Margin= Break even sales for J.B /
total market
=
(8914285.71 /
80000000) *100
= 11.14 % approx.