Zack Co. sells three sizes of bags: small, medium, and large. The company has annual fixed costs of P19,520,000. For the past several years, 20% of Hugo's sales have been the small and large bags with the remaining 60% being the medium size. Zack Co. does not expect this to change in the upcoming year. The following information is also available for each of the bags: Small Medium Large Sales price per unit P400 P700 P1,750 Variable costs per unit 150 200 450 Required: How many total bags does the company need to produce and sell in order to break even? How many medium bags need to be sold in order to break even? If Zack experiences a higher demand of large bags than it anticipated, will the break-even point increase, decrease, or stay the same? Why?
Zack Co. sells three sizes of bags: small, medium, and large. The company has annual fixed costs of P19,520,000. For the past several years, 20% of Hugo's sales have been the small and large bags with the remaining 60% being the medium size. Zack Co. does not expect this to change in the upcoming year. The following information is also available for each of the bags: Small Medium Large Sales price per unit P400 P700 P1,750 Variable costs per unit 150 200 450 Required: How many total bags does the company need to produce and sell in order to break even? How many medium bags need to be sold in order to break even? If Zack experiences a higher demand of large bags than it anticipated, will the break-even point increase, decrease, or stay the same? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Zack Co. sells three sizes of bags: small, medium, and large. The company has annual fixed costs of P19,520,000. For the past several years, 20% of Hugo's sales have been the small and large bags with the remaining 60% being the medium size. Zack Co. does not expect this to change in the upcoming year.
The following information is also available for each of the bags:
|
|
Small |
|
Medium |
|
Large |
|
Sales price per unit |
P400 |
|
P700 |
|
P1,750 |
|
Variable costs per unit |
150 |
|
200 |
|
450 |
Required:
- How many total bags does the company need to produce and sell in order to break even?
- How many medium bags need to be sold in order to break even?
- If Zack experiences a higher demand of large bags than it anticipated, will the break-even point increase, decrease, or stay the same? Why?
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