Go Green is a business selling worm farm start-up kit for $12 each. This year, G

Question

Go Green is a business selling worm farm start-up kit for $12 each. This year, Go Green’s fixed cost totals $110,000. The variable cost per kit is $7.

a.What is the break-even point in number of kits?

b.How many kits does Go Green needs to sell to earn a profit of $70,000?

c.If the total fixed cost increases to $160,000 next year

1.What will Go Green’s break-even point be in number of kits?

2.What profit (or loss) will Go Green have if it sells 30,000 kits?

3.How many kits will Go Green have to sell to earn a profit of $70,000?

Explanation / Answer

a) Statement showing computations Particulars Amount Sale price per unit                          12.00 Variable cost per unit                             7.00 Contribution per unit = 15 - 11                             5.00 Contribution margin ratio = 4/15 41.67% Fixed costs                110,000.00 BEP in units = 110,000/5                  22,000.00 b) Profit desired                    70,000.00 Fixed costs                110,000.00 Conribution desired                180,000.00 No of kits to be sold= 180,000/5                  36,000.00 c) Fixed costs                160,000.00 BEP in units = 160,000/5                  32,000.00 Sales = 30,000*12                360,000.00 VC = 30,000*7                210,000.00 Contribution = sales- VC                150,000.00 Fixed Costs                170,000.00 Income = 14,800 - 6,400                (20,000.00) Profit desired                    70,000.00 Fixed costs                170,000.00 Conribution desired                240,000.00 No of kits to be sold= 240,000/5                  48,000.00

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