(a) calculating the number of units (and its Malawi Kwacha amount) for achieving

(i ) Breakeven

Breakeven point for Pricing Plan 1 in Sales unit in MW

Solution

Given information

Price plan 1 = MK30, 000

Variable cost = MK9, 000 (MK8, 000 + MK2, 000)

FC = K200, 000,000

Substituting the known values into the formula for breakeven point in sales units, I get:

Breakeven Point in Sales Units (x) = Fixed cost / per unit margine contribution

= MK200,000,000/MK30,000 – MK9,000

=MK200,000,000/MK21,000

=9,523.809524

= 9, 523.81 units

Breakeven point in Sales in MK= (MK30,000 × 9.523.81 units)/1 units

= MK285, 714,300

a) Breakeven point for Pricing Plan 2 in Sales unit in MK

(b) Calculate the Contribution Margin ratio for both plans.

(c) Describing the meaning of Contribution Margin ratio.

(d) Explaining the relationship between Contribution Margin ratio and Number of Breakeven units.

(e)Explaining why it is important to calculate Margin of Safety.

(f) TWO examples of fixed cost in relation to the Recreation Centre.

(g) Defining Relevant Range.

Answer rating: 100% (QA)

Answer Solution Given Information Price K25 000 Variable cost K17 000 MK8 000 Mk7 000 Mk 2000 and Fixed Cost K200 000000 Substituting the known values into the formula for breakeven point in sales uni... View the full answer