Question

Q.6

Use the below table to answer the following questions.

Selling Price = $27.00

				Sales Volume
Fixed Cost			Variable Cost		2,100			3,100			4,100			5,100			6,100
					Profitability
$	25,700		8		$	14,200		$	33,200		$	52,200		$	71,200		$	90,200
	25,700		9			12,100			30,100			48,100			66,100			84,100
	25,700		10			10,000			27,000			44,000			61,000			78,000
	35,700		8			4,200			23,200			42,200			61,200			80,200
	35,700		9			2,100			20,100			38,100			56,100			74,100
	35,700		10			–			17,000			34,000			51,000			68,000
	45,700		8			(5,800	)		13,200			32,200			51,200			70,200
	45,700		9			(7,900	)		10,100			28,100			46,100			64,100
	45,700		10			(10,000	)		7,000			24,000			41,000			58,000

Required

1. Determine the sales volume, fixed cost, and variable cost per unit at the break-even point.

2. Determine the expected profit if Rundle projects the following data for Delatine: sales, 4,100 bottles; fixed cost, $25,700; and variable cost per unit, $10.

3. Rundle is considering new circumstances that would change the conditions described in Requirement b. Specifically, the company has an opportunity to decrease variable cost per unit to $8 if it agrees to conditions that will increase fixed cost to $35,700. Volume is expected to remain constant at 4,100 bottles. Determine the effects on the company’s profitability if this opportunity is accepted.

Complete this question by entering your answers in the tabs below. Required A Required B Required c Determine the sales volume, fixed cost, and variable cost per unit at the break-even point. bottles Sales volume Variable cost per unit Fixed cost

Answer 1

1. Observe the cell of 0 in the table, it is where Rundle is at break even point,  

   Sales volume	2,100	bottles
   Variable cost per unit	10	per bottle
   Fixed cost	35,700

   Break even point is a point at which the company has no profit and no loss.

2. Calculation of expected profit,

   • Sales 4,100 units @ 27 per unit = 110,700

   • Variable cost @ 10 per unit = 41,000

   • Fixed cost = 25,700

   • Therefore profit = 44,000.

3. Calculation of profit under new circumstances,

   • Sales 4,100 units @ 27 per unit = 110,700

   • Variable cost @ 8 per unit = 32,800

   • Fixed cost = 35,700

   • Therefore profit comes to =   42,200.

That is profit decreases by 1,800  (44,000 - 42,200).