Question

Lock P { [ Delete ] End Pg Dn 7 Home 8 1 9 Pg Up Enter 5 6 (c) How can Kramerica use the volume break-even point value calculated in part (a)? NOTE: The Excel spreadsheet can be very useful for this part as it performs many of these calcu- lations.) - (15 points). In other words: a. What types of recommendations would you make to Kramerica if the expected number of calculator sales is 32,000 over the next year? Should Kramerica purchase the equipment with this expected sales volume? b. Are they going to be profitable; if so, by how much? c. Is there going to be a loss; if so, how much? If there is a loss, what might you recom- mend?).

please explain

Answer 1

Given fixed costs = $ 8,50,000 Variable costs = $15 . per calculator Sellip Selling Price = 4 39 per calculator a Calculation of Profit / loss. Particulars Amt $. Sales (32000 @ 39) 1248000 less Variable cost (32000 @15) 480000 Contribution 768000 less: fixed cost 850000 Loss (82000) Kramerica should not purchase the equipment cerith this expected sales volume Break Even point fixed cost Selling poice - Variable cost per unit per unit 35,416.67 units 850000 - = 850000 = 39-15 24 sf the expected sales are increased to 35,416.67 Units, then we can eliminate the loss, loss, profit becomes Zero at this point. b) If the sales is 32,000 then we it is not at all profitable if the sales are increased about BEP then it is profitcube c) ff the sales k_32,000 there will be a loss of 82,000 $ So, increase the sales cenits above BEP to purchase the equipment.