Breakeven analysis -Case Study

JIC Company produces a single article. Following cost data is given about its product:

• Selling price per unit SAR 40
• Raw material cost SAR 24
• Total rent and insurance cost SAR 16000

As a quantitative analyst ,you need to assist JIC conducting a breakeven analysis to optimize its performance .

Compute the following:

1. Introduce the concept of breakeven point, then compute the BEP in term of units and Riyals. [ 1 mark]
2. What is the profit or loss that JIC will earn if 1200 units have been produced? [ 1 mark]
3. What is the profit or loss that JIC will earn if 700 units have been produced? [ 1 mark]
4. Re-compute the breakeven point if the selling price increased by 10%.[ 1 mark]
5. Re-compute the breakeven point if the raw material cost decreased by 5%.[ 1 mark]

Hint:You need to show all formulas and numerical computation to earn higher marks