The Sindh Engineering Company produces a bicycle which sells at Rs.1,000 per unit. At 80% capacity...

 

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The Sindh Engineering Company produces a bicycle which sells at Rs.1,000 per unit. At 80% capacity utilization which is the normal level of activity, the sales are Rs.180 million. Costs are as under: Prime cost per unit Factory indirect cost Selling costs Distribution costs Administration costs Rs.400 Rs.30 million (including variable cost Rs.10million) Rs.25 million (including variable cost Rs.15million) Rs.20 million (including variable cost Rs.11million) Rs.6 million Commission and discounts are 5% of sales value. Required: i. ii. Calculate the break-even sales value. Prepare statements showing sales, costs, profit and contribution margin at each of the following levels: a. at the normal level of activity; b. if unit selling price is reduced by 5% thereby increasing sales and production volume by 10% of the normal activity level; c. if unit selling price is reduced by 10% thereby increasing sales and production volume by 20% of the normal activity level. The Sindh Engineering Company produces a bicycle which sells at Rs.1,000 per unit. At 80% capacity utilization which is the normal level of activity, the sales are Rs.180 million. Costs are as under: Prime cost per unit Factory indirect cost Selling costs Distribution costs Administration costs Rs.400 Rs.30 million (including variable cost Rs.10million) Rs.25 million (including variable cost Rs.15million) Rs.20 million (including variable cost Rs.11million) Rs.6 million Commission and discounts are 5% of sales value. Required: i. ii. Calculate the break-even sales value. Prepare statements showing sales, costs, profit and contribution margin at each of the following levels: a. at the normal level of activity; b. if unit selling price is reduced by 5% thereby increasing sales and production volume by 10% of the normal activity level; c. if unit selling price is reduced by 10% thereby increasing sales and production volume by 20% of the normal activity level.

Answer rating: 100% (QA)

i To calculate the breakeven sales value we need to find the level of sales at which total revenue equals total costs Total Fixed Costs Factory indire... View the full answer