# Profit Before Tax Lab 4

LAB 4

PBT Calculation

The PBT projection for the coming year can be calculated as shown below.

 Particulars Amount Revenue Total Bottles Sold 630,000 Price Per bottle (\$) 1.59 Sales Revenue (\$) 1,001,700 Variable Costs Labor (\$) 233,100 Raw Material (\$) 327,600 Bottle Hardware (\$) 88,200 Fixed Costs Fixed Production (\$) 75,000 General & Admin 115,000 Advertising 45,000 Interest 41,000 Depreciation 47,000 Total Costs (\$) 971,900 PBT 29,800

Hence the expected PBT as shown above is \$29,800.

ROS Calculation

ROS = (PBT/Sales) *100

For the coming year, expected sales = \$1,001,700

Expected PBT = \$29,800

Hence ROS = (29800/1001700)*100 = 2.975%

LAB 5

1. Selling price of a bottle = \$1.59

Total fixed cost = (75000+115000+45000+41000+47000) = \$323,000

Variable cost per bottle = 0.37+0.52+0.14 = \$1.03

Let us assume that the breakeven quantity of bottle be X

Total revenue generated = 1.59X

Total costs (Fixed + Variable) = 323000 + 1.03X

For breakeven,  Revenue generated = Total costs

Hence 1.59X = 323000 + 1.03X

Which implies that X= 576,786 bottles

1. PBT calculation at full capacity is as shown below.
 Particulars Amount Revenue Total Bottles Sold 650,000 Price Per bottle (\$) 1.59 Sales Revenue (\$) 1,033,500 Variable Costs Labor (\$) 240,500 Raw Material (\$) 338,000 Bottle Hardware (\$) 91,000 Fixed Costs Fixed Production (\$) 75,000 General & Admin 115,000 Advertising 45,000 Interest 41,000 Depreciation 47,000 Total Costs (\$) 992,500 PBT (\$) 41,000

Hence PBT = \$41,000 and Sales = \$1,033,500

Hence ROS = (41000/1033500)*100 = 3.967%

1. Full production capacity = 650,000

Let the selling price per bottle be \$X

Total revenue generated at this capacity = 650000X

Total fixed cost = \$323,000

Total variable costs = 650000*1.03 = \$669,500

Total costs = \$992,500

PBT = 650000X – 992,500

Since ROS should be 11%

Hence (650000X – 992,500/ 650000X) = 0.11

Solving the above, we get X= \$1.716

1. Let the breakeven quantity be X bottles

Total revenues generated = 1.716X

Total fixed cost = (75000+115000+45000+41000+47000) = \$323,000

Variable cost per bottle = 0.37+0.52+0.14 = \$1.03

Total costs (Fixed + Variable) = 323000 + 1.03X

For breakeven,  Revenue generated = Total costs

Hence 1.716X = 323000 + 1.03X

Which implies that X= 470,805 bottles

1. Revenue at full production assuming price of \$1.59 = \$1,033,500

Total fixed cost = \$323,000

Let the cost per bottle be \$ X

Variable cost per bottle = X+0.52+0.14= 0.66+X

Total costs = 323,000 + (0.66+X)*650000

PBT = 1033500 – 323000 – [(0.66+X)*650000]

Since ROS is 11%, hence

(1033500 – 323000 – [(0.66+X)*650000])/1033500 = 0.11

Solving the above, we X = \$0.2582

1. 6.      Assuming the production @630,000 bottles

Let the selling price per bottle be \$X

Revenue generated = 630000X

Total Fixed costs = 323,000 + 60,000 = \$383,000

New unit variable cost = 1.03- 0.15 = \$0.88

Total variable costs = 0.88*63000 = \$554,400

Total costs = 383000 + 554400 = \$937,400

PBT = 630000X – 937400

Since ROS is 11%, hence

(630000X – 937400)/630000X = 0.11

Solving for X, we get X = \$1.672

Assuming the production @650,000

Let the selling price per bottle be \$X

Revenue generated = 650000X

Total Fixed costs = 323,000 + 60,000 = \$383,000

New unit variable cost = 1.03 – 0.15 = \$0.88

Total variable costs = 0.88*65000 = \$572,000

Total costs = 383000 + 572,000 = \$955,000

PBT = 650000X –955,000

Since ROS is 11%, hence

(650000X – 955,000)/650000X = 0.11

Solving for X, we get X = \$1.651