At the end of this year, Solarium, LLC is expected to have had sales revenue of
ID: 2654511 • Letter: A
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
a) Statement showing Income Particulars Amount Amount per Unit(300,000units) Sales 3,500,000.00 11.6667 Variable Costs 2,200,000.00 7.3333 Contribution 1,300,000.00 4.3333 Fixed Costs 800,000.00 Income 500,000.00 Break even Point = Fixed Costs/Cont per unit Break even Point =800,000/4.33 Break even Point =184,615.38 Thus Approx 184,616 units would be sold to break even b) Break even Sales = BEP in units*SP per unit Break even Sales = 184,616*11.66667 Break even Sales = 2,153,853 Statement showing Income if 500,000 units were sold Particulars Amount Amount per Unit(500,000units) Sales 5,833,333.33 11.6667 Variable Costs 3,666,666.67 7.3333 Contribution 2,166,666.67 4.3333 Fixed Costs 800,000.00 Income 1,366,666.67 OR No of units sold 500,000.00 Fixed Costs 800,000.00 Desired Contribution per unit to break even = Fixed Costs/ No of units sold = 800,000/500,000 1.60 VC per Unit 7.33 Price to be charged(VC + Cont per unit 8.93 Statement showing Income if 500,000 units were sold Particulars Amount Amount per Unit(500,000units) Sales 4,466,650.00 8.9333 Variable Costs 3,666,666.67 7.3333 Contribution 799,983.33 1.6000 Fixed Costs 800,000.00 Income (16.67) Note: In the question once you are saying in one line that price would be same and it other line you are asking for price which is causing confusion. So I have solved in the above manner for both the possible answers. You can take the answer as per your needs c) Current Profit 500,000.00 Desired profit = 2 times existing = 2*500,000 1,000,000.00 Existing FC 800,000.00 Change in FC 250,000.00 New FC for desred profit 1,050,000.00 No of units to be sold = (FC+ desired profit)/Cont per unit No of units to be sold =(1,000,000+1,050,000)/4.3333 No of units to be sold =2050,000)/4.3333 No of units to be sold =473,080.56 or 473081 Statement showing Income Particulars Amount(473,081 units) Amount per Unit Sales 5,519,278.33 11.6667 Variable Costs 3,469,260.67 7.3333 Contribution 2,050,017.67 4.3333 Fixed Costs 1,050,000.00 Income 1,000,017.67
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