Calculating projected total variable expenses and net profit...

Calculating Projected total variable expenses and net profit: This year's Total revenues $1,250 This year's Total fixed expenses $200 This year's Total variable expenses $850 This year's Net profit $200 Next year's Projected revenues $1,100 Calculate next year's projected: 1) total variable expenses 2) net profit

Transcript

00:01 The given question, we have been given that the current year's total revenue amounts to $1 ,250.

00:08 So, the current year revenue, that means the sales amount, we can say, is $1 ,250.

00:25 Apart from this, we have been given the total variable expense.

00:29 So the total variable expense for the current year is given to be.

00:40 850 dollars so now if we subtract the variable expense from our total revenue we are going to get our total contribution so the total contribution is what this is nothing but sales minus the variable expenses so this is going to be 400 dollars so we have the contribution we can easily find out the profit volume rate so the profit volume ratio known as pvr is what this is the total contribution divided by the total revenue or the sales times hundred so if we put the value we have calculated the contribution to be four hundred dollars and we have the total revenue of one two five zero dollars times hundred is going to get us our profit volume ratio and that comes to 32 percent so this is the profit volume ratio now going further to the question the question says that the next year the revenue is going to be this is given to be one one double zero dollars so next year we will have a revenue or we can see the sales of eleven hundred dollars okay, and we need to find out the variable expenses and the net profit.

02:29 So first of all, what we will be doing, we will be considering the profit volume ratio to remain constant.

02:37 So considering the pvr, that is the profit volume ratio, to remain constant as it was in the current year.

02:49 So this is how much? this is we have calculated to be 32%.

02:53 So now, we can easy.

02:56 Find out our contribution and the variable cost.

03:00 We know that total revenue is equal to total variable cost plus the total contribution.

03:22 For the next year we have total revenue of 1100.

03:27 So let's consider it to be 100%...