Question

1. A company produces two products Lyn and Myn which are types of oil pants in the month of January 2017, data relating to the two products were recorded as follows:

Products	Sales ($)	Cost of sales ($)	Fixed cost ($)
Lyn	60,000	42,000
Myn	60,000	30,000
Total	120,000	72,000	36,000

Required:

1. Calculate the profit volume ratio for each product
2. Compute the profit volume ratio, break-even point and net profit for the company under each of the following assumptions.

1. Sales ratio for Lyn 60% and Myn 40%
2. Sales ratio for Lyn 40% and Myn 60%

3. Construct a profit volume chart showing profits estimated on sales up to $180,000 per month for each of the (i) and (ii) above

Answer 1

(a)	Particulars	Lyn	Myn	Total
		50%	50%	100%
		$	$	$
	Sales	60,000	60,000	120,000
	Cost of sales	42,000	30,000	72,000
	Contribution margin	18,000	30,000	48,000
	Profit Volume Ratio	30%	50%
(b) (i)	Particulars	Lyn	Myn	Total	Fixed Cost	Profit
		60%	40%	100%
		$	$	$	$	$
	Sales	72,000	48,000	120,000
	Cost of sales	50,400	24,000	74,400
	Contribution margin	21,600	24,000	45,600	36,000	9,600
	Profit Volume Ratio	30%	50%
	Break-even point ($)	120,000	72,000
(b) (ii)	Particulars	Lyn	Myn	Total	Fixed Cost	Profit
		60%	40%	100%
		$	$	$	$	$
	Sales	48,000	72,000	120,000
	Cost of sales	33,600	36,000	69,600
	Contribution margin	14,400	36,000	50,400	36,000	14,400
	Profit Volume Ratio	30%	50%
	Break-even point ($)	120,000	72,000
(c) (i)	Particulars	Lyn	Myn	Total	Fixed Cost	Profit
		60%	40%	100%
		$	$	$	$	$
	Sales	108,000	72,000	180,000
	Cost of sales	75,600	36,000	111,600
	Contribution margin	32,400	36,000	68,400	36,000	32,400
	Profit Volume Ratio	30%	50%
	Break-even point ($)	120,000	72,000
(c) (ii)	Particulars	Lyn	Myn	Total	Fixed Cost	Profit
		60%	40%	100%
		$	$	$	$	$
	Sales	72,000	108,000	180,000
	Cost of sales	50,400	54,000	104,400
	Contribution margin	21,600	54,000	75,600	36,000	39,600
	Profit Volume Ratio	30%	50%
	Break-even point ($)	120,000	72,000