Question

POP limited is in the drinks manufacturing industry and has developed a new
energy drink.
To begin its mass production of the same drink, it needs to procure a machinery
and equipment at cost of K1, 867, 000.00POP wants to borrow this money from
the bank but it tell the bank that it can start paying back the loan after it makes a
profit equal to K93 350. The new equipment produces 1000units per day. Also
given that; the fixed cost is K994 000, the selling price is K9 and the variable
cost is 58% of the selling price.
Required:

I.	Find the number of unit POP limited has to produce to come out of a loss
making situation	[5 Marks]
II.	To make a profit of K150 000, how many units does it need to produce?
[5 Marks]
III.	How many days will it take before it begins paying back the loan?
[5 Marks]
IV.	If the price is reduced by 25%, what quantity would POP limited need to
produce to break-even?	[5 Marks]

B. The demand function for a manufacturer's product is;
? = ?? - ??
Where ? the number of units is and ? is the price per unit.
At what value of ? will there be maximum revenue? [5 Marks

Answer 1

Iy Breakeven Potut 2 Contribution - fixed cost=0 2-9,94,000 20 i contribution (n) z 994,000 We know that contribution & vamiable cost a Sel. Value 9,94,000 + 0.58 * 27 = x2 9,94, 0to 2 23,667666 :. Salvege value z 23,66,666 (o Number of unil produced to come out of loss z 2366 666 z 262,963 units 0.42 2 value (n) z profit & riped cost & variable cost 150000 +994 000 +0.58% > R2 1144000 2 2723810 0.4 ( No. of unit need to produce = 22723 810 z 302,645 unith 11 K2 K93350 +994,000 + 0.58 3 3 12 4087372 22588928 0.42 po No. 8( unib need to produce = 2598928 2287658 - No. of unit produced / day 2 1000 unih .. Dang required e 1244.58 . 2 281.7 ñ 288 days / Jono Ny Revised price 2 6.750/unit (257en) % 994000 + 0.58nan og nz 2366,666 :: No. unity to be produced - 23.44666 350617 with 6.7