Question # 3

Part A Note: You all need to use Excel for this question as you will need hit and trial to get the breakeven sales price.

Fruita Vitals Plc plans to produce a new drink based on fruit and yoghurt called Stream. It is anticipated that variable costs will amount to PKR *37 per drink. The company will produce Stream in a processing facility with a capacity to produce 400,000 drinks a year. Fixed costs are anticipated as being PKR165,000 per year. The company plans to supply to retailers at a price of PKR 100 per drink.

Required: a) Calculate the break-even volume and the break-even revenue at the projected price.

b) Calculate the break-even sales price to retailers if the factory is used at full capacity.

c) The company is thinking of setting the price at PKR 100 per drink and launching an advertising campaign at a cost of PKR 350,000 how many drinks will need to be sold to achieve a profit of PKR270,500.