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Sensitivity Analysis

Essay by   •  March 2, 2016  •  Coursework  •  2,040 Words (9 Pages)  •  1,226 Views

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Monthly operating profit when sales total $360,000

Total Sales Revenue = 360,000

Less Total Variable Exp. = 240,000

Contribution Margin = 120,000

Less Total Fixed Costs = 60,000

Operating Profit 60,000

2. Break-even number in units

BEP = Fixed Cost

Unit Contribution Margin

= 60,000 = 60,000 = 2000 units

90 – 60 30

3. Number of units sold that would produce an operating profit of $120,000.

(N x SP per unit) – (N x MC per unit) – Fixed Costs = Net Profit

(N x 90) – (N x 60) – 60,000 = 120,000

90 N – 60 N – 60,000 = 120,000

30 N = 120,000 + 60,000

30 N = 180,000

N = 6000

5. Number of units sold in March

Total Sales = no. of units x SP per unit

360,000 = N x 90

360,000 = 90 N

N = 4000 units

6. Number of units sold that would produce an operating profit of 40 percent of sales dollars

(N x SP per unit) – (N x MC per unit) – Fixed Costs = Net Profit

90N - 60 N - 60,000 = 40%

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