A company produces only one product. Normal capacity is 20000 units per year and
ID: 2435069 • Letter: A
Question
A company produces only one product. Normal capacity is 20000 units per year and the unit sales price is Rs.5 relevant costs are:
Unit Variable Cost
Total Fixed Cost
Materials
Rs.1.50
Director labour
1.20
Factory Overhead
0.45
Rs.15000
Marketing expenses
0.35
5000
Administrative expenses
6000
Required: Compute (2) break even point in units of product (2) break even point in sales (3) the number of units product that must be produced and sold to achieve a profit of Rs.10000 and (4) the sales revenue required to achieve a profit of Rs.10000. (20)
Unit Variable Cost
Total Fixed Cost
Materials
Rs.1.50
Director labour
1.20
Factory Overhead
0.45
Rs.15000
Marketing expenses
0.35
5000
Administrative expenses
6000
Explanation / Answer
Sale price $5.0 Variable cost $3.5 Contribution $1.5 Fixed cost $26,000 Breakeven point in units = Fixed cost ÷ Contribution per unit = 26,000 ÷ 1.5 = 17,334 units Breakeven point in sales = (Fixed cost ÷ Contribution per unit) x sale price = (26,000 ÷ 1.5) x 5 = $86,670 Number of units to achieve profit $10,000 = (Fixed cost+ Profit) ÷ Contribution per unit = (26,000 + 10,000) ÷ 1.5 = 24,000 units Sales to achieve profit $10,000 = {(Fixed cost+ Profit) ÷ Contribution per unit} x sale price = {(26,000 + 10,000) ÷ 1.5} x 5 = $120,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.