Managing Business Performance

Managing Business
Performance

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Statement of marginal costing showing 20 % profit on selling price..........................................1
2. and 3. Statement of marginal costing showing various changes in selling price and variable
cost...................................................................................................................................................2
4. Explanation of results and limitations of the exercise:..........................................................5
PART 2............................................................................................................................................5
1. Explantation of standard costing and process of setting standard costs................................5
2. Explantation of factors that can lead to both adverse and favourable materials and labour
Variances with example.............................................................................................................7
3. explanation of standard costing as a tool for control..............................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Managing business performance is a systematic process which helps organisation to
enhance their performance with using various techniques. In order to understand techniques of
performance management ABC footwear is taken for his report. It is newly establish business
organisation. In this report various tools of marginal costing has been identity. Uses of standard
costing and factors affecting of determining standard costing has been analysis.
PART 1
1. Statement of marginal costing showing 20 % profit on selling price
Statement of marginal costing
Particular Amount £1000 @ 100 per
unit
Amount
Sales 100 100000
- Variable cost ( 30%) 30 30000
Contribution 70 70000
- Fixed cost 50000 50000
Net profit 20000 20000
Calculation of Break even analysis
BEP in units = Fixed cost / Contribution per unit
BEP = 50000 / 70 = 714
BEP in sales amount = Fixed cost / PV Ratio
Calculation of PV ratio = Contribution / Amount of sale
PV ratio = 70000 / 100000 = 70%
BEP in sales amount = 50000 / 70% = 71429
Calculation of margin of safety
Margin of safety in unit = Actual sale unit – BEP sales unit ((Bresciani and Ferraris,
2016).
Margin of safety in unit = 1000 – 714 = 286
1

Margin of safety in % = Current sale – BEP sale / Current sale *100
Margin of safety in % = 100000 – 71429 / 100000 * 100 = 28.57 %
Calculation of net profit %
Net profit % = Net profit / Sales *100
Net profit % = 20000 /100000 *100 = 20 %
2. and 3. Statement of marginal costing showing various changes in selling price and variable
cost
 Increasing original selling price by 10%, leaving the variable cost unchange
Statement of marginal costing
Particular Amount £ 1000 @ per unit Amount
Sales 110 110000
- Variable cost ( 30%) 30 30000
Contribution 80 80000
- Fixed cost 50000 50000
Net profit 30000 30000
Calculation of Break even analysis
BEP in units = Fixed cost / Contribution per unit
BEP in units = 50000 / 80 = 625 unit
BEP in sales amount = Fixed cost / PV Ratio
Calculation of PV ratio = Contribution / Amount of sale*100 (Cleary and Quinn, 2016).
PV ratio = 80000 / 110000*100 = 72.7 %
BEP in sales = 50000 / 72.7 % = 68775
Calculation of margin of safety
Margin of safety in unit = Actual sale unit – BEP sales unit
Margin of safety = 1000 – 625 = 375 units
Margin of safety in % = Current sale – BEP sale / Current sale *100
Margin of safety in % = 110000 – 68775 / 110000 *100 = 37.4 %
Calculation of net profit %
Net profit % = Net profit / Sales *100
2