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Tea Cvp Analysis
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Tea Cvp Analysis

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  • Variable cost per unit

Tea Cvp Analysis Tea Cvp Analysis Presentation Transcript

  • 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
    • Fixed costs are business expenses that are not dependent on the level of activities of the business
    • Ex : rent of shop, electricity, etc…
    • VARIABLE COST
    • Variable costs are business expenses that change in proportion to the level of activities of a business.
    • Ex : milk ,sugar, tea 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
    • Rent Rs.300
    • Electricity Rs.15
    • Gas Cylinder Rs.210
    • Depreciation
      • Trolly Rs.5.5
      • Gas stove Rs.1
    • VARIABLE COST
    • Milk 20 litres @
    • Rs.26 per litre = Rs.520
    • Sugar 5 kg @
    • Rs.26 per kg = Rs.130
    • Tea leaves 0.5 kg @
    • Rs.170 per kg = Rs.85
    • 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
    • Total variable 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
  • 1600 1266.5 984 531.5 246 400 TR TC UNITS COST/REVENUE V C=Rs.735 FC BREAK-EVEN POINT PROFIT=Rs.333.5
    • Contribution = Revenue – Variable cost
    • Break even point = Fixed cost / Contribution per unit
    • Increase in 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
  • TR TC 1266.5 984 246 >246 TR1 TR2 FC UNITS <246 COST/REVENUE
    • 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.
  • <246 246 >246 UNITS COST/REVENUE TR TC1 TC2 TC
    • Abhas
    • Anurag
    • Deepthi
    • Hansita
    • Lavakusha
    • Maleshwari
  •