At the end of this year, Solarium, LLC is expected to have had sales revenue of

Question

At the end of this year, Solarium, LLC is expected to have had sales revenue of $3,500,000 from the sale of 300,000 units. The total of the variable costs were $2,200,000 and the fixed cost was $800,000. a If the fixed cost and variable cost per unit and price per unit stay the same in the upcoming year, what will the sales quantity have to be to break even in the upcoming year? b If the fixed cost and variable cost per unit and price per unit stay the same in the upcoming year, what would the price have to be to break even If 500,000 units were sold in the upcoming years? c An expanded marketing program that will cost an additional $250,000 has been proposed for the upcoming year. How many units would have to be sold to double profits if this marketing program is approved and the contribution per unit is unchanged? At the end of this year, Solarium, LLC is expected to have had sales revenue of $3,500,000 from the sale of 300,000 units. The total of the variable costs were $2,200,000 and the fixed cost was $800,000. a If the fixed cost and variable cost per unit and price per unit stay the same in the upcoming year, what will the sales quantity have to be to break even in the upcoming year? b If the fixed cost and variable cost per unit and price per unit stay the same in the upcoming year, what would the price have to be to break even If 500,000 units were sold in the upcoming years? c An expanded marketing program that will cost an additional $250,000 has been proposed for the upcoming year. How many units would have to be sold to double profits if this marketing program is approved and the contribution per unit is unchanged?

Explanation / Answer

For the current year Sales Turnover $ 3,500,000 No. of units sold 3,00,000 Sales Price/Unit 12 $ Variable Costs $ 2,200,000 No. of units sold 3,00,000 Variable Cost/Unit 7 $ Fixed Cost (Total) 8,00,000 $ For the next year (i) Scenario I Fixed Costs 8,00,000 $ Variable Costs per unit 7 $ Sales Revenue per unit 12 $ To obtain break even point, Revenue = Cost Hence, assuming the no. of units as X 800,000 + 7 X = 12 X 800,000 = 12 X - 7 X 800,000 = 5 X X = 160000 Hence, 160,000 units will have to be the sales quantity to break even in the next year (ii) Scenario II Fixed Costs 8,00,000 $ Variable Costs per unit 7.00 $ Sales Revenue per unit 12.00 $ Break even Point required for 500,000 units For breakeven, Sales = Cost Assuming sales revenue per unit as unknown (X) 800000 + 7 * 500,000 = 500,000 * X 4,300,000 = 500,000 X X = 8.6 $ Hence, the selling price per unit required to obtain breakeven in the case of 500,000 units will be 8.6$ per unit (iii) Scenario III Fixed Costs 8,00,000 $ Variable Costs per unit 7.00 $ Sales Revenue per unit 12.00 $ Additional Mktg. Expenses 2,50,000 $ Current Profits generated Revenue - Costs = 3,500,000 - 2,200,000 - 800,000 = 500,000 $ In the next year, the profits are to be doubled Hence, profits in the next year = 1,000,000 $ Profits = Revenue - Costs Assuming the number of units sold as unknown (X) 12X - 7X - 800,000 - 250,000 = 1,000,000 5X = 1,000,000 + 800,000 + 250,000 5X = 2,050,000 X =        4,10,000 Hence, to double the profits in the upcoming year, 410,000 units would have to be sold

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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