P4 P7 TThECalculate contribution marketing, Flora Albert, the most optimistic ct

Question

P4

P7

TThECalculate contribution marketing, Flora Albert, the most optimistic ct would be 15,000 units, and the highest com harge is $S52 per unit. How much more can ent on tised advertising costs if the selling pri g price the company can not be reduced, and the targcted profit for 15,000 unit sa S52 per Breakeven Analysis and Planning Future Sales P4. Marina Company has a maximum capacity of 200,00 facturing costs are $12 per unit. Fixed overhead is So and administrative costs are $5 per unit, and fixed sellin ing price is $52, the variable costs can unit sales is $251,0002 SHEET 00 units units per year. Variable manu units$300,000 per year. The current sales price is $600,000 per vear. Variable selling REQUIRED $23 per un it. 1. W hat is the breakeven 2. BUSINESS APPLICATION point in (a) sales units and (b) sales dollars? profit of S240,000 per year? manyu ow many units must Marina Company sell to earn a BUSINESS APPLICATION A strike at one of the company's mand major suppliers has and sales are lim- units. To partially offset the effect of the reduced sales on prott 3. BUSINES caused a shortage of materials, so the current year's production ited to 160,000 management is planning to reduce fixed costs to $841,000. Variable costs per unit are the same as last year. The already s selling price of S23 per unit a. What amount of fixed costs was covered by the total contribution mar e company has already sold 30,000 units at the regular the gin of first 30,000 units sold? b. What contribution margin per unit will be needed on the remaining 130,000 unir to cover the remaining fixed costs and to earn a profit of $210,000 this yean

Explanation / Answer

Solution to P4 -

Given information -

BEP = (600000+300000)/(23 - 17)

= 900000/6

= 150000 units

(b) in $ = 150000*23

= 3450000

2. Computation of units to earn a desired profit of 240000 -

units = (Fixed cost + Desired profit)/(Selling price per unit - variable cost per unit)

= (900000+240000)/(23-17)

= 1140000/6

= 190000 units

(a) Computation of the contribution margin of the first 30000 units sold -

so from the above computation of contribution margin $ 180000 fixed cost has recovered by selling of 30000 units.

(b) Compuation of contribution margin per unit to earn a profit of 210000 by selling of 130000 units -

Remaing units yet to sold = (remaining fixed cost + Desired profit)/(Contribution margin per unit)

130000 = [(841000 - 180000) + 210000]/cntribution margin per unit

contribution margin per unit = (661000 + 210000)/130000

= 871000/130000

= 6.7

Solution to problem P7 -

1. BEP (in units) = Fixed cost/(selling price per unit - variable cost per unit)

= 166500/(435 - 210)

= 740 units

2. BEP (in $) = 740*435

= 321900

3. Fixed cost go up by $ 10125 now the new fixed cost = 166500+10125

= 176625

New BEP = 176625/(435 -210)

= 785 units

4.

BEP = 181700/(425-195)

= 181700/230

= 790 units

Please comment in case of any clarification required/wrong answer.

Max. capacity 200000 units variable cost 12 per unit fixed cost 600000 per year variable selling and administrative costs 5 per unit fixed selling and administrative costs 300000 per year current sales price 23 per unit

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