(a) Calculate and determine the break-even points (in sales dollars and units) for each product type, assuming a constant sales mix.(b) Explain by showing relevant computations, how your answer to part (a) would change if the constant sales mix assumption is lifted. Rozar Ltd (RL) specialises in the manufacturer of luxury furniture for the gaming market. It isconsidering launching a new range of furniture. Based on market research performed, thecompany has estimated the following:Gaming chair2,800Message chair3,200Standing Desk3,600Selling priceUnits380420400Estimated production costs per unit:Gaming chair (S)300Message chair (S) Standing Desk ($)400Material500Labour800900975Variable overhead220220245Fixed overhead353540There are the following additional information:Labour costs are split into 40% variable and 60% fixed.Fixed overheads are absorbed on the basis of units produced.All fixed costs are incremental, i.e. if any of the new range of products islaunched, all of the fixed costs would be incurred for the whole range.The management of RL would like to know if the new range will breakeven prior to committingto production.

In Marginal Costing we calculate contributionmargin by deducting…

Answered: (a) Calculate and determine the…

(a) Calculate and determine the break-even points (in sales dollars and units) for each product type, assuming a constant sales mix.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

(a) Calculate and determine the break-even points (in sales dollars and units) for each product type, assuming a constant sales mix.

(b) Explain by showing relevant computations, how your answer to part (a) would change if the constant sales mix assumption is lifted.

Rozar Ltd (RL) specialises in the manufacturer of luxury furniture for the gaming market. It is
considering launching a new range of furniture. Based on market research performed, the
company has estimated the following:
Gaming chair
2,800
Message chair
3,200
Standing Desk
3,600
Selling price
Units
380
420
400
Estimated production costs per unit:
Gaming chair (S)
300
Message chair (S) Standing Desk ($)
400
Material
500
Labour
800
900
975
Variable overhead
220
220
245
Fixed overhead
35
35
40
There are the following additional information:
Labour costs are split into 40% variable and 60% fixed.
Fixed overheads are absorbed on the basis of units produced.
All fixed costs are incremental, i.e. if any of the new range of products is
launched, all of the fixed costs would be incurred for the whole range.
The management of RL would like to know if the new range will breakeven prior to committing
to production.

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