The Cockpit Country Industrial Co. Ltd has a maximum production capacity of 20 000 units. Each unit sells for $25. 

The following are the costs for a single unit of production.

Required 

(a) Using marginal costing, calculate the net profit if: 

(i) 15 000 units are produced and sold 

(ii) 18 000 units are produced and sold.

(b) Calculate the number of units required to break even. 

(c) Calculate the profit at full production capacity if all production is sold at the reduced price of $24. 

(d) State the possible advantages and disadvantages of reducing the normal selling price. 

(e) State five assumptions which are made in the preparation of break-even charts, and state one limitation of each assumption.

Transcribed Image Text:

Direct materials Direct labour Variable expenses Fixed expenses 200 4 kilograms at $4.10 per kilogram $12 per hour. 3 units are produced in one hour. $1.80 per unit for the first 16 000 units $1.70 per unit for all units in excess of 16 000 units PATE $1.50 per unit at full production