Question

Problem 4
Imagine that you own a restaurant named Ibra Fast Food. Prepare an imaginary list of examples of the following: a. Revenues (1) b. Fixed Costs per (at list 3 examples) c. Variable Costs (at list 3 examples) d. Number of units

Once these costs have been determined, find the following; • The Total Cost Equation • The Total Profit • The CM • The CM Ratio • The Break-Even Point in Sales / Dollars • The Break-Even Point in Units • The Margin of Safety in Sales / Dollars • The Margin of Safety in Units   

Answer 1

INCOME AND COST
PARTICULARS	AMOUNT	AMOUNT	PER UNIT
REVENUE		1000000	200
VARIABLE COSTS
MATERIAL 80 RS PER DISH	400000		80
ELECTRICITY 5% OF SALES	50000		10
SALARIES
(1 EMPLOYEE FOR 100 DISH)	200000	650000	40
(50 *4000)
CONTRIBUTION		350000	70
FIXED COST
RENT EXPENSE	100000
FRANCHISE FEES	50000
INSURANCE	20000	170000
PROFIT		180000
NO. OF DISHESH		5000
1) TOTAL COST EQUATION = 650000+170000 = 820000
2) TOTAL PROFIT = 180000
3) THE CONTRIBUTION MARGIN = 350000
4) CONTRIBUTION MARGIN RATIO = CONTRIBUTION /SALES
350000/1000000 *100
35%
5) BREAK EVEN POINT(DOLLARS) =	FIXED COST /CONTRIBUTION MARGIN
BREAK EVEN POINT =	170000/35%
BREAK EVEN POINT =	485714.2857
6) BREAK EVEN POINT(UNITS) =	FIXED COST /CONTRIBUTION PER UNIT
BREAK EVEN POINT(UNITS) =	170000/70
BREAK EVEN POINT(UNITS) =	2428.571429	DISHES
BREAK EVEN POINT(UNITS) =	2429	DISHES
7)MARGIN OF SAFETY (DOLLAR) =	ACTUAL SALES - BREAK EVEN SALES
MARGIN OF SAFETY (DOLLAR)=	1000000- 485714.29
MARGIN OF SAFETY (DOLLAR)=	514285.71
8)MARGIN OF SAFETY (UNITS) =	ACTUAL SALES - BREAK EVEN SALES
MARGIN OF SAFETY (UNITS)=	5000-2429
MARGIN OF SAFETY (UNITS)=	2571