Question

plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $7,400 per month and variable costs of $0.73 per unit produced. Each item is sold to retailers at a price that averages $1.13 a) The volume per month is required in order to break even = b) The profit or loss would be realized on a monthly volume of 61,000 units = c) The volume is needed to obtain a profit of $16,000 per month d) The volume is needed to provide revenue of $23,000 per month = (in whole number) (in whole (in whole number)

Answer 1

Answer

• All working forms part of the answer itself.
• Amounts are in “$”
• Working

A	Selling price per unit	$1.13
B	Variable cost per unit	$0.73
C=A-B	Contribution margin per unit	$0.4
D	Fixed Cost	$7400

• Answer a

A	Fixed Cost	$7400
B	Contribution margin per unit	$0.4
C=A/B	Break Even in Volume (units)	18500

• Answer b

A	Contribution margin	[61000 x $0.4] $24400
B	Fixed Cost	$7400
C=A-B	Profit realized on sale of 61000 units	$17000

• Answer c

A	Required profit	$16000
B	Fixed Cost	$7400
C=A+B	Contribution margin required	$23400
D	Contribution margin per unit	$0.4
E=C/D	Volume (units) required to earn $16000 profit	58500

• Answer d

A	Sales revenue	$23000
B	Selling price per unit	$1.13
C=A/B	Volume required to provide revenue of $23000	20354