Business Analytic: Costing and Revenue Behaviour, Correlation, Breakeven Point and Margin of Safety

Business Analytic

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................3
a) Developing a mathematical model by using cost information................................................3
b) Calculating the profit or loss...................................................................................................3
c) Drawing graph with spreadsheet for 5-year projection...........................................................4
d) Analysing costing and revenue behaviour..............................................................................5
QUESTION 2...................................................................................................................................6
a)..................................................................................................................................................6
calculating correlation.................................................................................................................6
b).................................................................................................................................................7
c)..................................................................................................................................................9
QUESTION 3.................................................................................................................................10
a) Determining breakeven point & margin of safety................................................................10
b) Discussing sales volume to achieve target and evaluating sales volume that will neither
cause profit nor loss..................................................................................................................12
c.................................................................................................................................................12
e)................................................................................................................................................12
REFERENCES..............................................................................................................................15

QUESTION 1
a) Developing a mathematical model by using cost information
The mathematical model helped in calculating the total cost of production as follows:
 Quantity produced = 400000
 Unit variable cost = £1.50
 Total variable cost = £600000
 Fixed cost = £100000
Therefore, Total cost = Fixed cost + variable cost
= £100,000 + £600000
= £700000
b) Calculating the profit or loss
Particulars Amount (£)
Total Cost
£700000
Unit variable
cost
£1.50
Fixed Cost
£100000
Quantity
produced
£400,000
Variable Cost
£600000

Annual Output 400000
Fixed cost 100000
Variable cost 600000
Total cost 700000
Selling price 3
Total sales 1200000
Profit 500000
c) Drawing graph with spreadsheet for 5-year projection
Particulars Year 2022 2023 2024 2025 2026
Total output 428000 457960 490017.2 524318.40 561020.69
Fixed cost 100000 100000 100000 100000 100000
Variable cost (in
units) 1.62 1.75 1.89 2.04 2.20
Total variable
cost 693360 801246.82 925920.82 1069994.1 1236485.18
Total cost £793360 £901246.82 £1025920.82 £1169994.1 £1336485.18
Selling price 3.21 3.43 3.68 3.93 4.21
Total sales £1373880 £1572955.21 £1800876.42 £2061823.42 £2360581.63
Profit/Loss £580520 £671708.40 £774955.60 £891829.32 £1024096.45