ABC Company’s income statement for the most recent month is given below:

Sales (12500 units @ 40 per unit) 500,000

Less variable expense 312,500

Contribution margin 1,87,500

Less Fixed expenses 160,000

Net operating profit 27,500

Requirements:

1. Compute the company’s breakeven point in both units and taka.
2. Without doing any calculation, what is the total contribution margin at the break-even point?
3. The president is convinced that a 10% reduction in selling price, combined with an increase of 30,000 in the monthly advertising budget, will cause units sales to double. What will be the new income statement look like if these changes are adopted?
4. Refer to the original data. The company’s advertising agency thinks that a new package would help sales. The new package would increase packaging costs by 1.20 per unit. Assuming no other changes, how many units would have to sold each month to earn a profit taka 80,000?

Answer rating: 100% (QA)

i Break even point in taka Fixed Expenses Contribution margin ratio 160000375 426667 approx Break ev... View the full answer