Question

Use below information for Questions 18 to 20:

Company X has collected the following information after its first year of sales. Sales were TL1,650,000 on 100,000 units. Selling expenses were TL275,000 of which 45% was variable. Direct materials were TL490,000 and direct labor were TL290,000. Administrative expenses were TL270,000 of which 20% was variable. MOH was TL387,000 of which 75% was variable.

Q-18) Compute contribution margin.

Q-19) Calculate breakeven point in TL.

Q-20) Calculate units to be sold to achieve a target net income of TL200.000.

Answer 1

Sales		1,650,000
Variable cost:
Direct material	490,000
Direct labor	290,000
MOH (387,000*75%)	290,250
Selling expense (275,000*45%)	123,750
Administrative expense (270,000*20%)	54,000
Total variable costs		1,248,000
Contribution margin		402,000
Fixed cost:
MOH (387,000*25%)	96,750
Selling expense (275,000*55%)	151,250
Administrative expense (270,000*80%)	216,000
Total fixed costs		464,000
Net income		(62,000)

1.

Contribution margin = TL402,000

2.

Breakeven points in TL = Fixed cost / Contribution margin ratio

Contribution margin ratio = 402,000 / 1,650,000 *100 = 24.36%

Breakeven points in TL = 464,000 / 24.36% = TL1,904,762

3.

Desired sales units = Fixed cost + Target net income / Contribution margin per unit

Contribution margin per unit = 402,000 / 100,000 = TL4.02

Desired sales units = 464,000 + 200,000 / 4.02 = 165,174 units