1 . The company plans to produce 120,000 kg of pasta per year and sell at an ave

ID: 2597834 • Letter: 1

Question

1. The company plans to produce 120,000 kg of pasta per year and sell at an average price

0.32 euro / kg. The planned costs are as follows:

_ raw materials u. c. material costs -10 400;

_ wages and social security contributions -8640, of which 20%

refers to the (fixed) cost of administration;

_ sales costs - 3200;

_ depreciation of fixed assets - 2240;

_ utilities and maintenance of premises -6800;

_ other fixed costs -1600;

_ other variable costs -2400.

Calculate;

- fixed, variable and total cost;

- minimum sales volume (break even point points) per year for repayment of their production;

2. The company must take a decision on the production and marketing of the product:

Basic 1. option 2.option 3.option

Produce variables costs 6 EUR - 2 EUR + 1 EUR + 1,2 EUR

Sales Variable costs 2 EUR 2 EUR 2 EUR 2 EUR

FIxed costs 30 000 EUR + 8 000 EUR + 15 000 EUR + 2 000 EUR

sales vol. of production 5 200 gab. 6 000 gab. 6 500 gab. 5 800 gab.

Products unit price 15 EUR 16,2 EUR 18 EUR 16,5 EUR

Task:

1. For each variant, calculate the critical point ; Choose the best option;

2. For each variant, construct a critical point diagram

1. Calculation of Total Cost, Fixed Cost & Variable cost.

Calculation of Fixed Cost

Calculation of Variable Cost

B. Calculation of Break even volume of sales

Overall Contribution Margin = Sales - Variable Cost = (120,000 x 0.32) - 22,912 = 15,488

Contribution per kg = 15,488 / 120,000 = 0.1291 per kg

Total Fixed Cost = 12,368

Minimum sales volume (Break even sales) = Fixed Cost / Contribution margin per Kg

= 12,368 / 0.1291 = 95801 kg Approx.

Particulars Amount 20% of wages (8640 x 20%) 1,728 Depreciation 2,240 Utilities & maintenance 6,800 Other Fixed cost 1,600 Total Fixed Cost 12,368

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