Question

# Problem 1 The fixed cost of a company is \$30,000 p.a. prime cost is \$6 per...

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.

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

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