Rosario Company, which is located in Buenos Aires, Argentina, manufactures a com

Question

Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 3,900,000 p per year. The variable cost of each component is 1,800p, and the components are sold for 3,100 p each. The company sold 5,300 components during the prior year. (p denotes the peso, Argentina’s national currency. Several countries use the peso as their monetary unit. On the day this exercise was written, Argentina’s peso was worth .192 U.S. dollars. In the following requirements, ignore income taxes)

1) Compute the break even point in units.

2) What will the new break-even point be if fixed costs increase by 10 percent?

3) What was the companys net imcome for the prior year?

4) The sales manager believes a reduction in the sales price to 2,600 p will result in orders for 800 more components each year. What will the break even point be if the price is changed?

Explanation / Answer

Ans 1 Break even point in units=Fixed Expenses/Unit contribution margin Contribution Margin=Sales- variable cot per unit Argentina currency 3900000/3100-1800 3000 units US $ .192*(3900000)/.192*(3100-1800) 3000 Ans 2 If fixed cost increases by 10% 3900000*110% 4290000 Argentina currency 4290000/3100-1800 3300 units US $ .192*(4290000)/.192*(3100-1800) 3300 Ans 3 in peso In $ No. of units sold 5300 Sales 3100*5300 16430000 3154560 Less: Variable Cost 1800*5300 9540000 1831680 Contribution Margin 6890000 1322880 Less: Fixed cost 3900000 748800 Net Income 2990000 574080 Ans 4 Break even point in units=Fixed Expenses/Unit contribution margin Contribution Margin=Sales- variable cot per unit Argentina currency 3900000/2600-1800 4875 units US $ .192*(3900000)/.192*(2600-1800) 4875

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.