VOLUME-COST-PROFIT (COMPARING TWO COMPANIES)
This program calculates profit-cost-volume relationships for two companies. It is useful
because it compares two companies with similar products, but different cost structures.
For instance, one company may operate a plant with low fixed and high variable costs
(usually an older plant), while another company's plant has relatively high fixed cost and
low variable costs (probably a more modern plant). This program calculates the
differences in break-even point, the point at which the two companies' profits are equal,
and the degree of operating leverage at the point where the profits are equal.
INPUTS (will appear in blue):
Six inputs are needed, three for each company:
1) Price per unit in cells D29 and F29.
2) Variable cost per unit in cells D30 and F30.
3) Total fixed cost in cells D31 and F31.
Sample data have been entered as an example.
COMPANY A COMPANY B
Price per unit $1.90 $2.00
Variable cost per unit $1.00 $1.50
Total fixed cost $60,000.00 $20,000.00
Break-even quantity 66666.67 40000.00
Break-even revenue $126,666.67 $80,000.00
Quantity 100000.00 100000.00
Profit $30,000.00 $30,000.00
Degree of operating leverage
at equal-profit quantity 3.00 1.67