Harshad electrical, manufactures and sales table fans for which there is continuous demand.

Market research has revealed that the unit selling price of competitors is 120 per unit. Therefore company decided unit selling price as 100 per unit as a penetration price. The financial management advised 3 lakh as initial investment with policy of recovering this within next 5 yrs. Production research revealed that unit variable cost is 40 per unit to meet the cost of materials, labour, Quality check, maintenance, power, consumption, water consumption, communication expense etc. Operation management department decided to have a BEP at 20% to the full production capacity, Make entire sensitivity analysis form all the angles including financial ratios, cost analysis, operational and marketing analysis and make business environment policy analysis. Computation for 100% capacity: (working quantity, Qw=5000) Selliing price, Pr = 100 1. %capacity utilisation, %Cu=100 2. Working Quantity, Qw = 5000 3. Working Sales, Sw = Qw * Pr = 5000* 100 = 500000 4. Working Total variable , Vtw= Vu* Qw = 40 * 5000 = 200000 5. Working Total contribution margin, Tcomw = Sw-Vtw = 500000-200000 = 300000 6. Fixed overhead, Foh = 60000 7. Working Total cost = Ctw= Foh + Vt = 60000+200000 = 260000 8. Working profit , Pw = Tcomw-Foh = Sw-Ct = 300000-60000=240000

9. Profit margin ratio = PMR = Pw/Sw = 240000/500000= 0.48 10. Margin of Safety, MOSq=Qw-Qb = 5000-1000 = 4000 11. Margin of Safety, MOS rs= Sw-Sb= 500000-100000 =400000 12. Margin of Safety, MOSfr= (Sw-Sb)/Sb= 400000/100000=4 13. Degree of operating leverage at Qw, DOOLw= Tcomw /Pw = 300000/240000=1.25 14. Degree of financial leverage, DOFL= EBIT/Riw = 240000/240000 = 1 15. Degree of capital leverage = DOCL = Tcomw/Riw = 300000/240000=1.25 16. Rate of return on investment = ROROIw= Pw/(Io+Vtw) = 240000/(300000+200000) = 0.48 17. Productivity index, Sw/Ctw = 500000/260000=1.92

18. Economic Value Added, EVA = NOPATw - CCw = NOPATw capital charge = NOPATw (total capital employed * weighted avg cost of capital) = 240000 (300000*13.33% + 200000*5%) =190010