Question

Problem 1

The fixed cost of a company is $30,000 p.a. prime cost is $6 per unit.Variable Overheads are $4 per unit.Selling price is $20 per unit. Present sales are 20,000 units a year.Calculate the break-even point in sales and units.

Problem 2

Calculate the break-even point from the following particulars:

Budgeted output80,000 units

Fixed Expenses$45,000.

Variable Cot Unit$15.00

Selling Cost per unit$25.00

If the selling price is reduce to $20 per unit, what will be the new break-even point?

Problem 3

A factory manufacturing sewing machines has the capacity to produce 500 machines per annum. The marginal (variable) cost of each machine is $200, and each machine is sold for $250. Fixed costs are $12,000 per annum. Calculate the break even points for output and sales and show what profit will result if out output is 90% of Capacity.

Answer 1

Answer to Problem 1:

Break Even Point (in Units) = Fixed Cost / Contribution Margin per unit
Contribution Margin per unit = Selling Price per unit – Variable Expense per unit
Variable Expense per unit = $6.00 + $4.00 = $10.00
Contribution Margin per unit = $20.00 - $10.00
Contribution Margin per unit = $10.00

Break Even Point (in Units) = 30,000 / 10
Break Even Point (in Units) = 3,000 units

Break Even Point (in Dollar Sales) = Fixed cost / Contribution Margin ratio
Contribution Margin ratio = Contribution Margin / Sales * 100
Contribution Margin ratio = 10/ 20 * 100
Contribution Margin ratio = 50%

Break Even Point (in Dollar Sales) = 30,000 / 0.50
Break Even Point (in Dollar Sales) = $60,000