Question: Walk About Ltd makes and sells product A. The current selling price is 11 and the total of variable costs per unit is 6.

Walk About Ltd makes and sells product A. The current selling price is 11 and the total of variable costs per unit is 6. The fixed costs of production are 350,000 and the company currently sells 75,000 units. Required: (a) Calculate the break-even point (in units and revenues) of product A for Walk About Ltd. (b) Calculate the profit made on sales of 75,000 units. (c) The company will make an advertising campaign costs 10,000 and will improve the product specifications, which will increase the variable cost per unit by 1. This is expected to allow the company to increase the selling price to 13 and the sales is expected to be 80,000 unites. Calculate the new profit figure for the improved product. (d) Discuss the limitations of break-even analysis.

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a To calculate the breakeven point of product A we need to determine the number of units and the revenue needed to cover the fixed costs Breakeven point in units Fixed costs Contribution margin per un... View full answer

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