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Palladium (Pty) Ltd would like to boost the sales of its products and predicts that by applying a promotional discount of 20% to its product and incurring an additional fixed cost of R250 000, unit

Palladium (Pty) Ltd would like to boost the sales of its products and predicts that by applying a promotional discount of 20% to its product and incurring an additional fixed cost of R250 000, unit

FINANCIAL ACCOUNTING
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 4 Palladium (Pty) Ltd has given you the following information relating to normal (budgeted) information and its expected promotional information: Normal Data Weekly sales (units) Normal variable cost per unit Contribution margin % Palladium (Pty) Ltd would like to boost the sales of its products and predicts that by applying a promotional discount of 20% to its product and incurring an additional fixed cost of R250 000, unit 150 000 R0,30 80% sales will be 2 and a half times higher than normal sales. Normal variable cost per unit is expected to remain the same for the promotional period. The promotional period is expected to last six (6) weeks. Q.4.2 Calculate the unit sales multiplier needed during the promotion to break even.
Transcribed Image Text:Question 4 Palladium (Pty) Ltd has given you the following information relating to normal (budgeted) information and its expected promotional information: Normal Data Weekly sales (units) Normal variable cost per unit Contribution margin % Palladium (Pty) Ltd would like to boost the sales of its products and predicts that by applying a promotional discount of 20% to its product and incurring an additional fixed cost of R250 000, unit 150 000 R0,30 80% sales will be 2 and a half times higher than normal sales. Normal variable cost per unit is expected to remain the same for the promotional period. The promotional period is expected to last six (6) weeks. Q.4.2 Calculate the unit sales multiplier needed during the promotion to break even.
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Step 1: Intro to breakeven

The breakeven point refers to the point of no profit and no loss. The advantage of finding out the firm's breakeven point is that it helps the management take corrective actions to reduce the losses incurred by the firm. It also provides a clear picture of the firm's financial health and helps in making future plans.

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