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Tea CVP Analysis

The document outlines the costs, sales, and break-even analysis of a tea shop in Bagh Amberpet. It details the fixed costs of rent, electricity, depreciation and variable costs of ingredients like milk, sugar, and tea leaves. Calculations are provided to determine the break-even point in units and rupees, and how that point would be affected by changes in revenues, costs, or prices.

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anandganpaa
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637 views23 pages

Tea CVP Analysis

The document outlines the costs, sales, and break-even analysis of a tea shop in Bagh Amberpet. It details the fixed costs of rent, electricity, depreciation and variable costs of ingredients like milk, sugar, and tea leaves. Calculations are provided to determine the break-even point in units and rupees, and how that point would be affected by changes in revenues, costs, or prices.

Uploaded by

anandganpaa
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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FIRST ASSIGNMENT

INTRODUCTION

 Location : Bagh Amberpet


 Business : Tea Shop
 Total Cost
 Total Sales
 Break-Even Analysis
 Effect on Break-Even Point with
respect to changes in revenue and
cost.
 TEA LEAVES
 MILK
 SUGAR
 WATER
 GAS
FIXED COST VARIABLE COST

 Fixed costs are  Variable costs are


business expenses business expenses
that are not that change in
dependent on the proportion to the
level of activities of level of activities of
the business a business.
 Ex : rent of shop,  Ex : milk ,sugar, tea
electricity, etc… leaves.
He invested Rs.20,000 for
Trolly.

He invested Rs.4,000 for


gas cylinder, gas stove and
glasses.
Cost of cylinder is Rs.840,
which ends in 4 days.
Water is free of cost.
Cost is calculated on per day
basis.
Depreciation is charged at 10%
per annum on trolly and gas
stove.
FIXED COST VARIABLE COST
 Rent  Milk 20 litres @
Rs.300 Rs.26 per litre =
 Electricity Rs.520
Rs.15  Sugar 5 kg @
 Gas Cylinder Rs.26 per kg =
Rs.210 Rs.130
 Depreciation  Tea leaves 0.5 kg @
 Trolly Rs.170 per kg =
Rs.5.5 Rs.85
 Gas stove
Rs.1
 Total Fixed cost for one day
= Rent + Electricity + Gas cylinder +
Depreciation
= 300 + 15 + 210 + 6.5
= Rs.531.5
 Fixed cost per unit = Total Fixed cost/Total no.of units
=531.5/400
=Rs.1.32875
 Totalvariable cost for one day
= Milk +
Sugar + Tea leaves
= 520 + 130
+ 85
= Rs.735
 He sells 400 cups of tea everyday at Rs. 4 per cups
 Cost of milk per unit = Cost of milk /Total cups of
tea sold
= 520 / 400
= 1.3 Rs per unit
 Cost of sugar per unit = Cost of sugar/Total cup of
tea sold
= 130 / 400
= 0.325 Rs. per unit
 Cost of tea leaves per unit = Cost of tea leaves /
Total cups of tea sold
= 85 / 400
= 0.2125 Rs. per
unit
 Variable Cost per unit = Rs. 1.3 + Rs.
0.325 + Rs. 0.2125 = Rs.
1.8375
(OR)

Variable Cost per unit = Total variable


cost/Total no. of units
= Rs. 735/ 400 cups

= Rs. 1.8375
 He sells 400 cups of tea everyday at
Rs. 4 per cup of tea.

 Total Sales = 400 cups x Rs.4


= Rs.1,600
 Calculation is done on per day basis

 He sells 400 cups of tea everyday at Rs. 4 per cups


 Total cost = Variable Cost + Fixed Cost
= 735 + 531.5
= Rs.1266.5
 Total profit = Total sales – Total cost
= 1600 – 1266.5
= Rs.333.5
 Contribution = Sales – Variable Cost
= 1600 – 735
= Rs.865

 Contribution Per Unit = Contribution/No. of Units


sold
= 865 / 400
= Rs.2.1625 per unit
This ratio indicates the relationship
between contribution and sales.
 PV ratio can be enhanced by either
reduction in variable expenses or increase
in sale price or both.
 P/V Ratio = Contribution x 100
Sales
 P/V ratio = (865/1600) x 100
= 54.06%
 The break-even point (BEP) is the point at which cost
of expenses and revenue are equal that is there is no
net loss or gain.
 Break Even Point = Fixed Cost/Contribution
(in units) Per unit
= 531.5 / 2.1625
= 246 units
 Break Even Point = Fixed Cost/PV Ratio
(in rupees) = 531.5/54.06%
= Rs.983.167
3.5
BREAK-EVEN POINT TR 3
Rs.3
FIT=
1600 O
PR TC

1266.5
COST/REVENUE

V C=Rs.735
984

531.5 FC

246 400
UNITS
 Contribution = Revenue – Variable cost
 Breakeven point = Fixed cost /
Contribution per unit
 Increasein the revenue will increase the
contribution and hence decrease the break
even point
 Decrease in the revenue will decrease the
contribution and hence increase the break
even point
R 2
T

1
TR

TR
1266.5 TC
COST/REVENUE

984

FC

<246 246 >246


UNITS
 Contribution = Revenue – variable
cost
 Break even point = Fixed cost /
Contribution per unit
 Increase in the cost (either variable or fixed
cost ) will cause an increase in the break
even point.
 Decrease in the cost (either variable or
fixed cost) will cause a decrease in the
break even point.
2
TR TC

TC

TC1
COST/REVENUE

<246 246 >246


UNITS
 Abhas
 Anurag
 Deepthi
 Hansita
 Lavakusha
 Maleshwari

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