FIRST ASSIGNMENT

INTRODUCTION

 Location : Bagh Amberpet

 Business : Tea Shop
 Total Cost
 Total Sales
 Break-Even Analysis
 Effect on Break-Even Point with
respect to changes in revenue and
cost.
 TEA LEAVES
 MILK
 SUGAR
 WATER
 GAS
FIXED COST VARIABLE COST

 Fixed costs are  Variable costs are

business expenses business expenses
that are not that change in
dependent on the proportion to the
level of activities of level of activities of
the business a business.
 Ex : rent of shop,  Ex : milk ,sugar, tea
electricity, etc… leaves.
He invested Rs.20,000 for
Trolly.

He invested Rs.4,000 for

gas cylinder, gas stove and
glasses.
Cost of cylinder is Rs.840,
which ends in 4 days.
Water is free of cost.
Cost is calculated on per day
basis.
Depreciation is charged at 10%
per annum on trolly and gas
stove.
FIXED COST VARIABLE COST
 Rent  Milk 20 litres @
Rs.300 Rs.26 per litre =
 Electricity Rs.520
Rs.15  Sugar 5 kg @
 Gas Cylinder Rs.26 per kg =
Rs.210 Rs.130
 Depreciation  Tea leaves 0.5 kg @
 Trolly Rs.170 per kg =
Rs.5.5 Rs.85
 Gas stove
Rs.1
 Total Fixed cost for one day
= Rent + Electricity + Gas cylinder +
Depreciation
= 300 + 15 + 210 + 6.5
= Rs.531.5
 Fixed cost per unit = Total Fixed cost/Total no.of units
=531.5/400
=Rs.1.32875
 Totalvariable cost for one day
= Milk +
Sugar + Tea leaves
= 520 + 130
+ 85
= Rs.735
 He sells 400 cups of tea everyday at Rs. 4 per cups
 Cost of milk per unit = Cost of milk /Total cups of
tea sold
= 520 / 400
= 1.3 Rs per unit
 Cost of sugar per unit = Cost of sugar/Total cup of
tea sold
= 130 / 400
= 0.325 Rs. per unit
 Cost of tea leaves per unit = Cost of tea leaves /
Total cups of tea sold
= 85 / 400
= 0.2125 Rs. per
unit
 Variable Cost per unit = Rs. 1.3 + Rs.
0.325 + Rs. 0.2125 = Rs.
1.8375
(OR)

Variable Cost per unit = Total variable

cost/Total no. of units
= Rs. 735/ 400 cups

= Rs. 1.8375
 He sells 400 cups of tea everyday at
Rs. 4 per cup of tea.

 Total Sales = 400 cups x Rs.4

= Rs.1,600
 Calculation is done on per day basis

 He sells 400 cups of tea everyday at Rs. 4 per cups

 Total cost = Variable Cost + Fixed Cost
= 735 + 531.5
= Rs.1266.5
 Total profit = Total sales – Total cost
= 1600 – 1266.5
= Rs.333.5
 Contribution = Sales – Variable Cost
= 1600 – 735
= Rs.865

 Contribution Per Unit = Contribution/No. of Units

sold
= 865 / 400
= Rs.2.1625 per unit
This ratio indicates the relationship
between contribution and sales.
 PV ratio can be enhanced by either
reduction in variable expenses or increase
in sale price or both.
 P/V Ratio = Contribution x 100
Sales
 P/V ratio = (865/1600) x 100
= 54.06%
 The break-even point (BEP) is the point at which cost
of expenses and revenue are equal that is there is no
net loss or gain.
 Break Even Point = Fixed Cost/Contribution
(in units) Per unit
= 531.5 / 2.1625
= 246 units
 Break Even Point = Fixed Cost/PV Ratio
(in rupees) = 531.5/54.06%
= Rs.983.167
 3.5
BREAK-EVEN POINT TR 3
Rs.3
FIT=
1600 O
PR TC

1266.5
COST/REVENUE

V C=Rs.735
984

531.5 FC

246 400
UNITS
 Contribution = Revenue – Variable cost
 Breakeven point = Fixed cost /
Contribution per unit
 Increasein the revenue will increase the
contribution and hence decrease the break
even point
 Decrease in the revenue will decrease the
contribution and hence increase the break
even point
 R 2
T

1
TR

TR
1266.5 TC
COST/REVENUE

984

FC

<246 246 >246

UNITS
 Contribution = Revenue – variable
cost
 Break even point = Fixed cost /
Contribution per unit
 Increase in the cost (either variable or fixed
cost ) will cause an increase in the break
even point.
 Decrease in the cost (either variable or
fixed cost) will cause a decrease in the
break even point.
 2
TR TC

TC

TC1
COST/REVENUE

<246 246 >246

UNITS
 Abhas
 Anurag
 Deepthi
 Hansita
 Lavakusha
 Maleshwari