DG Company is the exclusive importer of spare parts of automobile products in Ghana. The parts sell for GHS40 per unit and has variable cost of GHS28 per unit. The company’s fixed expenses are GHS180,000 per year. The company plans to sell 16,000 units of the product in 2016. Required: (i) What is the break-even point in units and Ghana cedis? (ii) What sales level in units and in sales value is required to earn an annual profit of GHS60,000? (iii) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by GHS4 per unit. What is the company’s new break-even point in units and sales value? (iv) Explain the effects of the changes in variable expenses on the break-even of the company.
DG Company is the exclusive importer of spare parts of automobile products in Ghana. The parts sell for GHS40 per unit and has variable cost of GHS28 per unit. The company’s fixed expenses are GHS180,000 per year. The company plans to sell 16,000 units of the product in 2016.
Required:
(i) What is the break-even point in units and Ghana cedis?
(ii) What sales level in units and in sales value is required to earn an annual profit of GHS60,000?
(iii) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by GHS4 per unit. What is the company’s new break-even point in units and sales value?
(iv) Explain the effects of the changes in variable expenses on the break-even of the company.
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