A Company budgets for a production of 150000 units. The variable cost per unit is ¢14 and fixed cost per unit is ¢2 per unit. The company fixes the selling price to fetch a profit of 15% on cost. Required: What is the break- even point? B] What is the profit/volume ratio? C] If the selling price is reduced by 5%, how does the revised selling price affects the Break Even Point and the Profit/Volume Ratio?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A Company budgets for a production of 150000 units. The variable cost per unit is ¢14 and fixed cost per unit is ¢2 per unit. The company fixes the selling price to fetch a profit of 15% on cost.

Required:

  1. What is the break- even point?
  2. B] What is the profit/volume ratio?
  3. C] If the selling price is reduced by 5%, how does the revised selling price affects the Break Even Point and the Profit/Volume Ratio?
  4. D] If profit increase of 10% is desired more than the budget, what should be the sales at the reduced price?
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