1. Calculate contribution margin per customer as average revenue ($8) minus average variable cost ($3), which is $5.
2. Calculate break-even point in customers as fixed costs ($450,000) divided by contribution margin per customer ($5), which is 90,000 customers.
3. Calculate taxable income as contribution margin ($5 per customer) times number of customers minus fixed costs ($450,000).
4. Calculate income taxes as 30% of taxable income.
5. Calculate net income as taxable income minus income taxes.
DEFINITION of 'Operating Leverage'
A measurement of the degree to which a firm or project incurs a combination of fixed and variable costs.
1. A business that makes few sales, with each sale providing a very high gross margin, is said to be highly leveraged. A business that makes many sales, with each sale contributing a very slight margin, is said to be less leveraged. As the volume of sales in a business increases, each new sale contributes less to fixed costs and more to profitability.
2. A business that has a higher proportion of fixed costs and a lower proportion of variable costs is said to have used more operating leverage. Those businesses with lower fixed costs and higher variable costs are said to employ less operating leverage.
Financial Leverage:
Financial leverage is the degree to which a company uses fixed-income securities such as debt and preferred equity. The more debt financing a company uses, the higher its financial leverage. A high degree of financial leverage means high interest payments, which negatively affect the company's bottom-line earnings per share.
Financial risk is the risk to the stockholders that is caused by an increase in debt and preferred equities in a company's capital structure. As a company increases debt and preferred equities, interest payments increase, reducing EPS. As a result, risk to stockholder return is increased. A company should keep its optimal capital structure in mind when making financing decisions to ensure any increases in debt and preferred equity increase the value of the company.
DEFINITION of 'Operating Leverage'
A measurement of the degree to which a firm or project incurs a combination of fixed and variable costs.
1. A business that makes few sales, with each sale providing a very high gross margin, is said to be highly leveraged. A business that makes many sales, with each sale contributing a very slight margin, is said to be less leveraged. As the volume of sales in a business increases, each new sale contributes less to fixed costs and more to profitability.
2. A business that has a higher proportion of fixed costs and a lower proportion of variable costs is said to have used more operating leverage. Those businesses with lower fixed costs and higher variable costs are said to employ less operating leverage.
Financial Leverage:
Financial leverage is the degree to which a company uses fixed-income securities such as debt and preferred equity. The more debt financing a company uses, the higher its financial leverage. A high degree of financial leverage means high interest payments, which negatively affect the company's bottom-line earnings per share.
Financial risk is the risk to the stockholders that is caused by an increase in debt and preferred equities in a company's capital structure. As a company increases debt and preferred equities, interest payments increase, reducing EPS. As a result, risk to stockholder return is increased. A company should keep its optimal capital structure in mind when making financing decisions to ensure any increases in debt and preferred equity increase the value of the company.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
for Anti-inflammatory, Antiulcer, Anticancer, Wound healing, Antidiabetic, Hepatoprotective, Cardio protective, Diuretics and
Antifertility, Toxicity studies as per OECD guidelines
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
2. CVP is the study of how Cost and Volume affect the profit
margin. It is a powerful tool in making managerial decisions
including marketing, production, investment, and financing
decisions.
Cost, Volume, Profit (CVP)Analysis
Prices of
products
Volume or
level of
activity
Per unit
variable
costs
Total
Fixed
Costs
Mixed of
products
sold
2
3. Cost Structure is the function of Fixed Cost and Variable Cost.
TC=VC+FC
Cost Structure
VC
(DM,DL, Factory
Overhead)
FC
(Factory rent,
Supervisors
Salary)
Which varies with the changes of
production “Proportionately”
Remain Fixed, doesn’t varies
with production
3
4. Contribution Margin is the amount remaining from sales
after variable expenses have been deducted.
Sales - Variable Expense = CM
150 – 50 = 100
CM Ratio:
CM/Sales = CMR
100/150 = 66.7%
Contribution Margin (CM)4
5. Formula:
BEP [Unit] = Fixed Cost / CM
BEP [Taka] = Fixed Cost / CM Ratio
Sales = Variable Cost + Fixed Cost+ Profit
Break Even Point (BEP)
BEP is the point where there is no profit no loss. (profit is Zero)
5
6. Selling Price=250/Unit, VC =150/Unit, FC=35,000
ABC Company is currently selling 400 speakers per month at 250 Taka per
speaker for total monthly sales of 1,00,000 Taka. Variable Expense is 150
taka/Unit. The sales manager feels that a 10,000 increase in the monthly
advertising budget would increase monthly sales by 30,000 Taka to a total of
520 Units. FC = 35,000 Taka. Should the advertising budget be increased ?
Change in Fixed Cost & Sales Volume
Particulars Current Sales New Sales Difference
Sales 100000 138000 38000
Variable Expenses 60000 90000 30000
Contribution
Margin
40000 48000 8000
Fixed Expense 35000 50000 10000
Net Operating
Income
5000 (2000) (2000)
6
7. The margin of safety is the positive difference between sales
and break even sales.
The Margin of Safety = Sales – Break even Sales
The Margin of Safety7
8. Operating leverage is a measure of how sensitive net operating
income is to a giver percentage change in dollar sales.
DOL= CM/Net operating income
Operating Leverage8
9. *Oslo Company prepared the following contribution format income statement based on a
sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Required:
1. What is the contribution margin per unit?
2. What is the contribution margin ratio?
3. What is the variable expense ratio?
4. If sales increase to 1,001 units, what would be the increase in net operating income?
5. If sales decline to 900 units, what would be the net operating income?
6. If the selling price increases by $2 per unit and the sales volume decreases by 100
units, what would be the net operating income?
7. If the variable cost per unit increases by $1, spending on advertising increases by
$1,500, and unit sales increase by 250 units, what would be the net operating income?
9
Sales $20,000
Variable expenses 12,000
Contribution margin 8,000
Fixed expenses 6,000
Net operating income $ 2,000
Problem
10. 8. What is the break-even point in unit sales?
9. What is the break-even point in dollar sales?
10. How many units must be sold to achieve a target profit of $5,000?
11. What is the margin of safety in dollars? What is the margin of safety percentage?
12. What is the degree of operating leverage?
13. Using the degree of operating leverage, what is the estimated percent increase in net
operating income of a 5% increase in sales?
14. Assume that the amounts of the company’s total variable expenses and total fixed
expenses were reversed. In other words, assume that the total variable expenses are
$6,000 and the total fixed expenses are $12,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating leverage?
15. Using the degree of operating leverage that you computed in the previous question,
what is the estimated percent increase in net operating income of a 5% increase in sales?
10
11. Solution
11
Given volume=1000 units
CM per unit = CM/Volume = 8000/1000 = $8 per unit
CM ratio = (CM/sales)*100 = (8000/20000)*100 = 40%
Variable expenses ratio = (Variable cost/sales)*100 = (12000/20000)*100 =60%
1
2
3
12. 12
CM per unit = $8 per unit
Increase in unit sales (1001-1000)=1 unit
Increase in Net operating income (8*1) = $8
For 900 units
Particulars Amount
Sales (900*20) 18000
Variable expense (900*12) 10800
CM 7200
Fixed expense 6000
Net operating income 1200
4
5
13. Sales increase $2 per unit, volume decrease 100 units so, for (1000-100)=900 units
13
Particulars Amount
Sales (900*22) 19800
Variable expense (900*12) 10800
CM 9000
Fixed expense 6000
Net operating income 3000
6
14. Variable cost increase $1 unit increase 250 spending on advertising
increases so fixed cost increases $ 1500 For (1000+250) = 1250 units.
14
Particulars Amount
Sales (1250*20) 25000
Variable expense (1250*13) 16250
CM 8750
Fixed expense 7500
Net operating income 1250
7
15. 15
BEP in unit = (fixed cost /CM per unit ) = (6000/8) = 750 units
BEP unit sales = ( fixed cost /CM ratio ) = (6000/40%) = 150001
Given, target profit =5000
Unit sales = (fixed cost+ target profit /CM per unit)
= (6000+5000/8) =1375 units
8
10
9
16. 16 MOS in dollars =sales-BEP sales = 20000-15000=5000
MOS in % =( MOS/ sales)*100= (5000/20000)*100 = 25%
DOL= (CM/ Net operating income) = (8000/2000) = 4
Present increase=DOL * increase =4*5=20%
11
13
12
19. Morton Company’s contribution format income statement for last month is given below:
Sales (15,000 units 3 $30 per unit) . . . . . . . . . $450,000
Variable expenses . . . . . . . . . . . . . . . . . . . . . . 315,000
Contribution margin . . . . . . . . . . . . . . . . . . . . . 135,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Net operating income . . . . . . . . . . . . . . . . . . . . $ 45,000
The industry in which Morton Company operates is quite sensitive to cyclical movements in
the economy. Thus, profits vary considerably from year to year according to general economic
conditions.The company has a large amount of unused capacity and is studying ways of
improving profits.
19
Problem
20. Required:
1.New equipment has come onto the market that would allow Morton
Company to automate a portion of its operations. Variable expenses would be
reduced by $9 per unit. However, fixed expenses would increase to a total of
$225,000 each month. Prepare two contribution format income statements, one
showing present operations and one showing how operations would appear if
the new equipment is purchased. Show an Amount column, a Per Unit column,
and a Percent column on each statement. Do not show percentages for the fixed
expenses.
2. Refer to the income statements in (1) above. For both present operations and
the proposed new operations, compute (a) the degree of operating leverage, (b)
the break-even point in dollar sales, and (c) the margin of safety in both dollar
and percentage terms.
20
21. 3. Refer again to the data in (1) above. As a manager, what factor would be
paramount in your mind in deciding whether to purchase the new equipment?
(Assume that enough funds are available to make the purchase.)
4. Refer to the original data. Rather than purchase new equipment, the
marketing manager argues that the company’s marketing strategy should be
changed. Rather than pay sales commissions, which are currently included in
variable expenses, the company would pay salespersons fixed salaries and
would invest heavily in advertising. The marketing manager claims this new
approach would increase unit sales by 30% without any change in selling
price; the company’s new monthly fixed expenses would be $180,000; and its
net operating income would increase by 20%. Compute the break-even point
in dollar sales for the company under the new marketing strategy. Do you
agree with the marketing manager’s proposal?
21
22. Particulars Present
Amount Per unit %
Sales(15000 units)
Variable expense
450000
315000
30
21
100
70
CM 135000 9 30
Fixed expense 90000
Net operating
income
45000
22
Solution
1
23. In proposed variable expense reduced$9 so, it is (21-9) = $12
and fixed expense is $225000
Particulars Present
Amount Per unit %
Sales(15000 units)
Variable expense
450000
180000
30
12
100
40
CM 270000 18 60
Fixed expense 225000
Net operating
income
45000
23
24. 24
a) Degree of operating leverage :
Present, DOL = (CM/NOI) = (135000/45000) = 3
Proposed, DOL= (CM/NOI) = (270000/45000) = 6
b) BEP in dollar sales
Present, BEP in dollar sales = (fixed expense /CM ratio)
= (90000/.3)
= $300000
Proposed, BEP in dollar sales = (fixed expense /CM ratio)
= (225000/0.6)
= $375000
2
25. 25
C) Margin of safety in dollars and %
Present, MOS in dollars = actual sales –BEP sales
=450000-300000 = $150000
Present,
MOS %= (MOS/ actual sales)*100 = (150000/450000)*100 = 33.33%
Proposed, MOS in dollars=actual sales –BEP sales
=450000-375000 = $75000
Proposed,
MOS %= (MOS/ actual sales)*100 = (75000/450000)*100 =16.67%
27. 27
30% sales increase so, 450000+30% of 450000 = $585000
Fixed expense will be = $180000
NOI increase 20% = 45000+20%of 45000 = 54000
We know,
Profit = (sales- Variable expense) - Fixed expense
Or, 54000= (585000- Variable expense)- 180000
Variable expense=$351000
4
28. Alternative way
28
We know, sales- Variable expense= CM
CM - Fixed expense = NOI
Let,
CM=x Variable expense=y
x- 180000= 54000
x= CM= 234000
then,
sales –y =234000
585000-y=234000
Y= Variable expense = 351000
29. Tax related Math
Taves Donuts sells donuts, coffee, and other related food
items. The following information is available:
Service varies from a single coffee to multiple dozen
donuts. The average revenue earned for each customer is
$8.00.
The average cost of food and other variable costs for each
customer is $3.00.
Total fixed costs for the year is $450,000.
The income tax rate is 30%.
Target (i.e., desired) net income is $105,000.
29
30. Data: SP = $8.00; VC = $3.00; FC = $450,000;
Target income = $105,000; Tax Rate = .30
How many customers are needed to reach the desired
profit?
Solution:
BE(units)= Total Fixed Cost/ CM(units)
= $450,000/($8 – 3)
= 90,000 customers
30
31. Desired customers,Q= (FC + Desired Profit)/ CM(units)
As we know,
Revenue – Cost of goods sold = Gross Margin
Gross Margin – Other Expense = Net Income Before Tax
Net Income Before Tax – Income Tax = Net Income
So,
NIBT – (NIBT* tax rate) = NI
NIBT (1 – tax rate) = NI
NIBT = NI/ (1 – tax rate)
= $105,000/ (1 – .30)
= $150,000
31
34. Particulars Velcro Metal Nylon
Normal annual
sales volume
100,000 200,000 400,000
Unit selling price
$1.65 $1.50 $0.85
Variable expense
per unit
$1.25 $0.70 $0.25
Total fixed expenses are $400,000 per year.
All three products are sold in highly competitive markets, so the Walmart
company is unable to raise its prices without losing unacceptable numbers of
customers.
The company has an extremely effective lean production system, so there are
no beginning or ending work in process or finished goods inventories
CVP for Multi-Product
Company
35. Required:
1. What is the company’s over-all break-even point in dollar sales?
2. Of the total fixed expenses of $400,000, $20,000 could be avoided if the
Velcro product is dropped, $80,000 if the Metal product is dropped, and
$60,000 if the Nylon product is dropped. The remaining fixed expenses of
$240,000 consist of common fixed expenses such as administrative salaries
and rent on the factory building that could be avoided only by going out of
business entirely.
a. What is the break-even point in unit sales for each product?
b . If the company sells exactly the break-even quantity of each
product, what will be the overall profit of the company? Explain this result.
36. Particular Velcro Metal Nylon Total
Sales $165,000 $300,000 $340,000 $805,000
Variable expenses 125,000 140,000 100,000 365,000
Contribution
margin
$40,000 $160,000 $240,000 440,000
Fixed expenses 400,000
Net operating
income
40,000
Solution
1.
37. Continued..
2. The issue is what to do with the common fixed cost when computing
the break-evens for the individual products. The correct approach is to
ignore the common fixed costs. If the common fixed costs are included in
the computations, the break-even points will be overstated for individual
products and managers may drop products that in fact are profitable.
a. The break-even points for each product can be computed using the
contribution margin approach as follows:
38. b. If the company were to sell exactly the break-even quantities computed
above, the company would lose $240,000—the amount of the common
fixed cost. This can be verified as follows:
Continued..
