Answer a
Break even Point (in units) = Fixed Cost / Contribution per unit |
=36000 / $ 6 |
= 6,000 units |
Calculations:
Contribution per unit = selling price – variable cost per unit |
= $ 15 -$ 9 |
= $ 6 |
Answer b
Desired sales = (Fixed Cost + Profit)/ Contribution per unit |
=(36000+,000) / $ 6 |
= 7,500 units |
Answer c
The Loss would reduce by $ 3,000.
Calculations:
Income statement | ||
Present | Proposed | |
Sales | $ 75,000 | $ 97,500 |
Less: variable Cost | $ 45,000 | $ 58,500 |
Contribution | $ 30,000 | $ 39,000 |
Less: Fixed Cost | $ 36,000 | $ 42,000 |
Net Income | $ (6,000) | $ (3,000) |
In case of any doubt, please comment.
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