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.
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