A single product is made by Botaniko, Inc. The company\'s December 2018 income s
ID: 2577512 • Letter: A
Question
A single product is made by Botaniko, Inc. The company's December 2018 income statement is below.
Sales (5,000 units) $150,000
Less variable expenses (75,000)
Contribution margin 75,000
Less fixed expenses (30,000)
Net income $ 45,000
Required:
a. Contribution margin per unit is $ ________ per unit
b. If sales are doubled to $300,000, total variable costs will equal $ ________
c. If sales are doubled to $300,000, total fixed costs will equal $ ________
d. If 20 more units are sold, profits will increase by $ ________
e. Compute how many units must be sold to break even # ________
(Based on the initial data)
f. Compute how many units must be sold to achieve profits of $30,000 # ________
(Based on the initial data)
Explanation / Answer
hi
Contribution margin= Total contribution/ no:of units
= 75000/5000=15 per unit
we know that the variable costper unit wiill be fixed,
please be careful variable cost per unit will be fixed.
> here the variable cost per unit is = 75000/5000
=15
> if sales are doubled i.e 10000 units then varaible cost will be 10000*15 =150000.
C.) we know that irrespective of the production FIXED COSTS REMAINS SAME.
hence, if sales doubled the fixed costs remain same amount of 30000 only.
D.) Assuming additional 20 units and hence the total unitsof sale will be 5020
on 5000 units already income 45000 is earned,hence the saleof additional units will add profit to the organisation.
as already fixed expenses is observed by 5000 units hence for additional 20 units no fixed expenses wil be there.
therefore the contribution margin of 20 units will added as profits =20*15=300
TOTAL INCOME=45000+300=45300.
E.) In order to acheive break even no:of units to be sold is 2000 units.
Break even=contribution=fixedcost
net income=0
hence,at 2000 units break even is acheived.
f.) Desired Profit of 30000
no:of units to be sold = Desired profit+ fixed cost)/Contribution per unit
=(30000+30000)/15
=4000 units
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