CVP_Pizza+Business_Solution

Current expected sales for next year be units thus

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Unformatted text preview: ected sales for next year BE units Thus, MOS or - R288 000 – 6 632 x R40 = R22 720 = 7 200 pizzas = 6 632 pizzas = 7 200 – 6 632 = 568 pizzas per annum or - R22 720 / R288 000 = 7.9% So, sales can drop by 568 units or R22 720 or 7.9% from current expected levels before losses will be incurred. Part 3. DOL = CM / net profit = R19 x 7 200 / (R19 x 7 200 – R126 000) = 12.67 times So if sales increase / (decrease) by 1% then net profit will increase / (decrease) by 1% x 12.67 = 12.67%. The DOL shows the volatility of net profit in relation to volatility in sales. Part 4. Current profit: R19 x 7 200 – R126 000 = R10 800 New profit: R19x110%x7 200 – (R126 000 + R10 000) = R14 480 So, the advertising idea should be adopted since it increases net profit from current expected levels. Compiled by Colin C Smith 2013...
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