PEMODELAN KEUANGAN

DAN SIMULASI BISNIS

PERTEMUAN 4
SEMESTER 1 2022/2023

TEACHING TEAM
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AGENDA – CALCULATION SECTION IN FINANCIAL MODEL

01 Revenue Budget

02 Cost of Revenue Budget Budgeted Income Statement

03 Operating Expenses Budget

04 Additional: Breakeven Analysis

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BUDGETED INCOME STATEMENT

 This session covers the calculation section for Budgeted Income Statement (also called the “P&L” by
financial professionals).
 The ultimate output of the Income Statement is known as “net income” which represents the
difference between a business’s revenues and a business’s expenses.
 The Budgeted Income Statement combines elements from several different schedules such as Sales
Budget, Cost of Revenue Budget, Headcount Budget, Operating Expenses Budget, Capex Budget and
Financing Budget.

Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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EXAMPLE – SALES/REVENUE BUDGET

Input and Assumption Section Calculation Section

Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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EXAMPLE – COGS OR COST OF SALES BUDGET

Input and Assumption Section Calculation Section

Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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EXAMPLE – HEADCOUNT BUDGET

Input and Assumption Section

Calculation Section
Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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EXAMPLE – OPERATING EXPENSES BUDGET

Input and Assumption Section Calculation Section

Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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BUDGETED INCOME STATEMENT: PUTTING ALL TOGETHER

From sales or revenue budget (Session 2)

From COGS or cost of sales budget (Session 2)
From headcount budget (Session 2)
From operating expenses budget (Session 2)

From capital expenditure budget (Session 3)

From financing budget (Session 3)

Add tax rate assumption in input section

Tax expense = tax rate * taxable income
(or earnings before tax)

Reference: Proctor, K. S. (2009). Building financial models with Microsoft Excel: A guide for business professionals (Vol. 532). John Wiley and Sons.
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BREAKEVEN ANALYSIS

 We often want to know what quantity of a particular product has to be made in order to break even or
produce a specific profit.
 This methodology divides costs into fixed and variable and seeks to find a level of production, which
results in a breakeven state.

The formula for the breakeven (when EBIT = 0) is:

BEP_Q = F / (P – V)
• Q = quantity produced and sold
• F = total fixed cost
• P = price per unit
• V = variable cost per unit

Reference: Day, A. L. (2003). Mastering financial modelling. A Practitioner's Guide to Applied.

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BREAKEVEN ANALYSIS

If we have a certain target for EBIT, the formula would be:

Target_Q = (F + Target_EBIT) / (P – V)

An alternative is to calculate the cash breakeven which exclude non-cash items such as depreciation:
Cash_Q = (F – Non_Cash_Items) / (P – V)

Reference: Day, A. L. (2003). Mastering financial modelling. A Practitioner's Guide to Applied.

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Breakeven Analysis
EXAMPLE –
Target EBIT 100,000 200,000 300,000 400,000 500,000 1,500,000
BREAKEVEN ANALYSIS
Year 0 1 2 3 4 5 Total/Mean
Jan-22 Jan-23 Jan-24 Jan-25 Jan-26 Jan-27

Sales Volume 50,000 55,000 45,000 35,000 25,000 210,000

Price per Unit 60.00 58.50 57.04 55.61 54.22 57.07
Sales Revenue 3,000,000 3,217,500 2,566,688 1,946,405 1,355,532 12,086,124
Variable Costs
Annual Cost per Unit 40.00 36.00 32.40 29.16 26.24 32.76
Manufacturing Cost (2,000,000) (1,980,000) (1,458,000) (1,020,600) (656,100) (7,114,700)
Contribution 1,000,000 1,237,500 1,108,688 925,805 699,432 4,971,424 Costs are classified into variable
Fixed Costs
Selling and Administration Costs (100,000) (100,000) (100,000) (100,000) (100,000) (500,000)
and fixed.
Depreciation (500,000) (500,000) (500,000) (500,000) (500,000) (2,500,000)
Total Fixed Costs (600,000) (600,000) (600,000) (600,000) (600,000) (3,000,000)

Earnings before Interest and Tax (EBIT) 400,000 637,500 508,688 325,805 99,432 1,971,424

Break Even Analysis >> EBIT = 0

Break even volume Q = F / (P-V) 30,000 26,667 24,353 22,683 21,446 123,389
Break even revenue Q*P 1,800,000 1,560,000 1,389,041 1,261,435 1,162,828 1,162,829
Contribution percentage (P - V) / P 33.3% 38.5% 43.2% 47.6% 51.6% 42.6% Breakeven analysis when EBIT = 0
Excess/(Deficit) Units 20,000 28,333 20,647 12,317 3,554 86,611
Excess/(Deficit) Revenue 1,200,000 1,657,500 1,177,646 684,969 192,704 10,923,295

Volume for target EBIT Q = (F + EBIT) / (P-V) 35,000 35,556 36,530 37,805 39,318 185,084
Revenue including target EBIT Q*P 2,100,000 2,080,000 2,083,562 2,102,392 2,131,852 10,563,504 Breakeven analysis for certain
Excess/(Deficit) Units
Excess/(Deficit) Revenue
Margin of Safety 15,000
900,000
19,444
1,137,500
8,470
483,126
(2,805)
(155,988)
(14,318) 24,916
(776,320) 1,522,620
target EBIT
Cash break even Q = (F - Deprn) / (P-V) 5,000 4,444 4,059 3,780 3,574 20,565
Cash revenue Q*P 300,000 260,000 231,507 210,239 193,805 1,173,723 Alternative cash breakeven
Excess/(Deficit) Units
Excess/(Deficit) Revenue
45,000
2,700,000
50,556
2,957,500
40,941
2,335,181
31,220
1,736,165
21,426
1,161,727
189,435
10,912,401
analysis, excluding non-cash items
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BREAKEVEN ANALYSIS – PRODUCT MIX

When more than one product is involved, we need to determine the sales mix and then derive a weighted-
average contribution margin.
BE_Revenue = Fixed_Cost / Contribution_Margin_Ratio
The breakeven revenue is then multiplied by the sales percentage of each product to find the breakeven
revenue for each product.
BE_Revenue_ProductA = BE_Revenue * Sales_Percentage_ProductA
Dividing by the sale price per unit calculates the number of units required.
BE_Q_ProductA = BE_Revenue_ProductA / Price_ProductA

Reference: Day, A. L. (2003). Mastering financial modelling. A Practitioner's Guide to Applied.

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EXAMPLE – BREAKEVEN ANALYSIS FOR PRODUCT MIX

Breakeven Analysis - Product Mix

Products A B C Total/Mean
Assume that there are 3 products with
Quantity 500 1,000 750 2,250.00 each selling price and variable cost.
Selling Price 40 70 30 46.67
Variable Cost 16 35 8 19.67 Fixed cost is assumed in total (cannot be
Fixed Cost 30,000
identified for each product).

Sales 20,000 70,000 22,500 112,500 Sales mix is the proportion of each
Mix 17.78% 62.22% 20.00% 100% product sale to the total sales
Variable Cost (8,000) (35,000) (6,000) (49,000)
Contribution Margin Sales - VC 12,000 35,000 16,500 63,500

Ratio Contrib / Sales 60.00% 50.00% 73.33% 56.44%

Break Even Revenue FC / Contrib Ratio 53,150 Breakeven revenue is calculated in total,
Break Even (BE) BE * Mix 9,449 33,071 10,630 53,150 then multiplied by sales mix for each
product
Variance Sales - BE 10,551 36,929 11,870 59,350
Number of Units BE / Selling price 236 472 354 1,063 Breakeven quantity for each product is BE
Variance - Units Quantity - BEP units 264 528 396 1,187 revenue each product divided by selling
price
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GROUP ASSIGNMENT
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GROUP ASSIGNMENT
Assignment Week #4
Create Calculation Section in your Financial Model for:
 Revenue Budget
 COGS or Cost of Sales Budget
 Operating Expenses Budget
 Budgeted Income Statement

Prepare your business operating budget for presentation in Week #5 (all groups).

Notes
Templates for input section are not provided. Students are required to develop their own financial models
according to the business model proposed in the previous sessions.
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PRESENTATION OUTLINE FOR WEEK #5

Prepare your business operating budget for presentation in Week #5 (all groups).
 Business overview (20%)
 Revenue and cost structure assumptions (30%)
 Budgeted income statement (20%)
 Analysis and conclusion (30%)
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Thank You