The 2011 income statement for Panorama Ltd is as follows: PANORAMA LTD Income Statement for the year ended 31 December, 2011 Sales (50,000 units) $ 1,250,000 Variable Costs $ 750,000 Contribution Margin $ 500,000 Fixed Costs $ 580,000 Net Profit (Loss) $ (80,000 )
Required:
Answer the following independent questions and show computations using the Contribution Margin technique to support your answers:
a) What was the company's break-even point in sales dollars in 2011?
b) How many additional units would the company have had to sell in 2011 in order to earn a net profit of $50,000.
c) If the company is able to reduce variable costs by $2.50 per unit in 2012 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net profit of $60,000?