1. XYZ Company produces a single product. It sold 50000 units last year with the following...

 

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1. XYZ Company produces a single product. It sold 50000 units last year with the following results: Sales Tk.6000000 Variable cost 3200000 1500000 1300000 Fixed costs Net income In an attempt to improve its products, MRS is planning to increase variable cost Tk.7.5 per unit. A new machine would also be needed to increase plant capacity costing Tk.590000 that will be depreciated over 5 years period under straight-line method with salvage value Tk.140000. (2+1+1) i. If the company holds the sales price constant and makes the suggested changes, what will be the required sales in the coming year to be in break-even position and to earn same amount of profit like last year? ii. If the company wishes to maintain the same contribution margin ratio, what selling price per unit of product must it charge next year to cover the increased variable cost? iii. What is the required sales in amount for earning 15% profit after covering the increased costs? 1. XYZ Company produces a single product. It sold 50000 units last year with the following results: Sales Tk.6000000 Variable cost 3200000 1500000 1300000 Fixed costs Net income In an attempt to improve its products, MRS is planning to increase variable cost Tk.7.5 per unit. A new machine would also be needed to increase plant capacity costing Tk.590000 that will be depreciated over 5 years period under straight-line method with salvage value Tk.140000. (2+1+1) i. If the company holds the sales price constant and makes the suggested changes, what will be the required sales in the coming year to be in break-even position and to earn same amount of profit like last year? ii. If the company wishes to maintain the same contribution margin ratio, what selling price per unit of product must it charge next year to cover the increased variable cost? iii. What is the required sales in amount for earning 15% profit after covering the increased costs?

Answer rating: 100% (QA)

Solution New Profitability statement Calculations per unit total Sales 600000050000 120 6... View the full answer