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The Mgulani JKT Furniture Company produces and sells a single high-priced chair and in fiscal
2015 the company produced and sold 30,000 units. The 2015 income statement of the company
reported the following:
Mgulani JKT Furniture Company
Income Statement
For Fiscal Year 2015
Total Tsh’s
Sales 1,800,000
Variable Costs 1,350,000
Contribution Margin 450,000
Fixed Costs 240,000
Income before Taxes 210,000
Tax Expense 63,000
Income after Taxes 147,000
The following are the figures which needed to the performing CVP analysis;
Recall;
Marginal safety= Total sales and production Breakeven Point in unity (BEP).
But; BEP = Fixed cost
Contribution margin in unity
solution
DOL = Tsh.450,000
Tsh.210,000
= 2.148
Hence; the degree of operating leverage= 2.14
If the company’s sales in units were increase by 30% the profit before taxes will increase in
percentage of term;
iv) To compute the sales level required in units to achieve a level of profits before taxes of
Tsh270,000.
Data given;
= 240,000 + [210,000/(1-0.3)]
15 units
= 36,000 units
Data given;
= Tsh.342,000
Contribution margin per unit = Tsh65 per unit – Tsh46 per unit = Tsh19 per unit
Recall;
Breakeven Point (BEP) = Total fixed cost
Contribution margin per unit
= 342,000
19
= 18,000 units