Overall break even point = Fixed cost / Contribution margin ratio = $16,650,000 / 64.74% = $25,718,257 approx So if this is the overall break-even point, let's assume that sales revenue remains constant, what is the impact on break-even and the margin of safety if Paul takes Mary Jane’s advice and increases sales commission to 15%?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Overall break even point = Fixed cost / Contribution margin ratio
= $16,650,000 / 64.74%
= $25,718,257 approx
So if this is the overall break-even point, let's assume that sales revenue remains constant, what is the impact on break-even and the margin of safety if Paul takes Mary Jane’s advice and increases sales commission to 15%?
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