Breakeven unit = total fixed cost / contribution per unit
|
Box A |
Box B |
Fixed cost |
1200 |
1200 |
Contribution per unit |
3.5 |
3.8 |
Breakeven units |
343 units |
316 units |
Expected profit
|
Box A |
Box B |
Selling price |
8 |
7 |
Less variable costs |
|
|
Ingredients |
3 |
2 |
Preparation time |
1 |
0.7 |
Biodegradable box |
0.5 |
0.5 |
Contribution per unit |
3.5 |
3.8 |
Number of units |
400 |
440 |
Total contribution margin |
1400 |
1672 |
Less fixed cost |
1200 |
1200 |
Total expected profit |
200 |
472 |
Profit needed =800 in each
For A
Let number be X
Then X * 3.5 -1200 =800
X =571.43 units
Box needed of A =571.43 boxes
For B
Let number be Y
Then Y * 3.8 -1200 =800
Y =526.32
Box needed of B =526.32 boxes
D) Heriot and Watt are considering a selling price increase of 10% for both lunch box options. How many boxes of each option would they have to sell to achieve a target profit of £900?
E) Based on the information calculated above (a – d) explain, which option Heriot and Watt should choose: Lunch Box A or Lunch Box B. You should also consider if the information you calculated is sufficient for making an informed decision.
![Lunch Box A
Lunch Box B
Selling Price
Ingredients.
Preparation time
Biodegradable box .
Selling Price
Ingredients
Preparation time
Biodegradable box
7.00
2.00
8.00
3.00
1.00
0.70
0.50
0.50
Fixed overheads are £1,200 and expected
Fixed overheads are £1,200 and expected
sales are 400 boxes.
sales are 440 boxes.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb244608d-9486-44b9-a649-61fd6277152b%2F260b4eed-6ea9-463c-a045-defd2611cd91%2F8j1s4m_processed.jpeg&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)