Question

You are the financial manager of a small ice cream company, planning to launch a new product. This is a small chocolate-coated ice cream, produced as a boxed unit containing 24 ice creams.

A) Using the following information, determine what would be the minimum number of units to be made each month:

• Selling price per unit - £15
• Variable costs per unit - £10
• Fixed costs per month - £6,000

Costing

• Calculations and explanation of each step
• Dealing with overheads – full absorption costing and other costing methods.
• Justification of the chosen method
• Break-even – calculation and explanation
• Interpretation and explanation of the results

B)

If the company finds that it is able to produce 2,000 units per month, what would be the new breakeven selling price? As a consequence, propose a selling price to the company directors for their next meeting, providing detailed reasons to justify your proposal.

Costing and pricing

• Break-even – calculation and explanation
• Pricing – cost plus, marginal cost, price takers etc. Evaluate the use of different costing methods for pricing purposes
• Marginal costing

Answer 1

B. Break even selling price 13 colatation - 2000 - Break even soles site 6ooo - Ehed cost. 6000 & 3 per unit contribution, 2000 2006 sales cenits - GooD is contenibution = contribution & 2000 units Avaliable Cost = sales. * Goco +20001d) = 26000_ 13 selling 2000 unite peice per CamScam ?PY! cenit. 1:20

A. - Particularis m selling price per unit is Variable cost per unit o Fixed cost per unit = 6000 Break even Eixed cost in writs contribution pesunit. contribution per un't selling price t) Variable cost!! = 15-to Scatted with CamScanner = 5 €

é Break even - units - 600o 5 = 1200H. Roo unite. . Miniman no of unite fes Scanntowibe made for month CamScanner