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## Effect of Changes in Variable Costs

Effect of Changes in Variable Costs Assuming an increase of VC by Re 1 a unit for SV Ltd the new contribution margin will be: Rs 3 (Rs 10 – Rs 7) and the revised P/V ratio 0.30 that is. (Rs 3 + Rs 10). Revised BEP = (Rs 26,(00)/0.30 = Rs 86,667 Desired sales...

## Effect of Changes In Fixed Costs

Effect of Changes In Fixed Costs A firm may be confronted with the situation of increasing fixed costs. An increase in the total budgeted fixed costs of a firm may be necessitated either by external factors such as an increase in property taxes, insurance rates,...

## Additional Sales Volume Required to Offset a Reduction In Selling Price

Additional Sales Volume Required to Offset a Reduction In Selling Price The sales manager on the basis of a market research/survey may report to the management that due to increased compunction in the market and the liberal import policy of the government, the present...

## Break-Even Analysis Applications

Break-Even Analysis Applications Sales Volume Required to Produce Desired Operating Profit One application of a BE analysis is to determine the required sales volume to generate a budgeted amount of profit. The required sales are given by Eq. 8.15. (Fixed expenses +...

## Equation Technique

Equation Technique This is the most general form of analysis, which can be applied to any cost volume profit situation. It is based on an income equation: Sales revenue Total costs = Net profit Breaking up total costs into fixed and variable, Sales revenue Fixed costs...

## Margin of Safety

Margin of Safety The excess of the actual sales revenue (ASR) over the break-even sales revenue (BESR) is known as the margin of safety. Symbolically, margin of safety = (ASR – BESR) When the margin of safety (amount) is divided by the actual salt (amount), till...