A company manufactures a single product. Budget and standard cost details for next year include: Selling price
Question:
A company manufactures a single product.
Budget and standard cost details for next year include:
Selling price per unit ................................$24.00
Variable production cost per unit ...............$8.60
Fixed production costs ........................$650 000
Fixed selling and distribution costs .....$230 400
Sales commission ................................5% of selling price
Sales ....................................................90 000 units
Required:
(i) Calculate the break-even point in units.
(ii) Calculate the percentage by which the budgeted sales can fall before the company begins to make a loss.
The marketing manager has suggested that the selling price per unit can be increased to $25.00 if the sales commission is increased to 8 percent of selling price and a further $10 000 is spent on advertising.
(iii) Calculate the revised break-even point based on the marketing manager’s suggestion.
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