Question

Scenario 3

Media Wise sells a range of media products in package deals. The products sold within bundles are as follows.  

	TV	Stand	Speaker
Selling Price (£)	400	50	40
Variable Cost (£)	250	30	25

Package A consists of a TV and a stand and is sold for a discounted price of £420. Package B consists of a TV, a stand and two speakers and is sold for a discounted price of £480. Currently packages are sold in a ratio of 2 Package As for every 3 Package Bs and 600 packages are sold each month. Fixed costs are expected to be £82,000 for the month.  

Question 3

Calculate the margin of safety (in number of bundles and as a percentage) if the current sales mix remains unchanged

Answer 1

Answer to question

Particulars	Package A	Package	Total
Ratio of mix	2	3	5
Package	240	360	600
Selling Price packages	420	480	900
Sales Value	$ 1,00,800.00	$ 1,72,800.00	$ 2,73,600.00
Variable cost	$     67,200.00	$ 1,18,800.00	$ 1,86,000.00
Contribution	$     33,600.00	$     54,000.00	$     87,600.00
Fixed Cost	0	0	$     82,000.00
Profit	$       5,600.00
Margin of Safety = Sales - BEP sales
Sales	600
BEP Sales	283
Margin of Safety in Bundle	317
Margin of Safety in percentage	53
Working
Break even Point	Fixed cost	$     82,000.00
	PV Ratio	32%
Break even Point in Value		256110
Break even Point in Bundle	283
PV Ratio	32%
Contribution per bundle	900.00	610	290.00
Variable cost	TV	Stand			Variable cost per package
Package A	1	1
Variable cost	250	30	280		280
Units			240
Total Variable cost			$     67,200.00
Variable cost	TV	Stand	Speaker
Package B	1	1	2
Variable cost	250	30	25	330	330
Units				360
Total Variable cost				$ 1,18,800.00	610