Eminence Toaster Company sells its toasters for Rs 20 each, the variable cost per unit is Rs. 8 and the fixed costs are Rs. 9,60,000 per year before modernization. Eminence wants to carry out the modernization of the existing plant. If the modernization is carried out the new plant would have fixed costs of Rs. 12,60,000 per year but its variable costs would fall to Rs. 6 per unit. Q1. How is break even point determined? Q2.Calculate the break-even quantity of the old plant and the break even point after modernization
Answers
Explanation:
Sales is 200000 Rs and variable cost is 120000, find the P/V ratio? ... The variable costs for each unit are Rs8. The contribution margin per unit is? ... The company's break-even point in units is: ...
Answer:
Sales is 200000 Rs and variable cost is 120000
Explanation:
To calculate the break-even point based on units: Divide fixed costs by revenue per unit minus variable costs per unit. The contribution margin is determined by subtracting variable costs from the product price. This amount is then used to cover fixed costs.
The given values are
The selling price per piece is CZK 20
Variable cost Rs.12
Total Fixed Price Rs.96,000
we know that the tipping point is
BEP = fixed price/(selling price – variable price
so BEP = 96,000/(20 - 12)
BEP = 96000/8
BEP = 12,000 units
In Rs
BEP =( fixed price × selling price ) / (selling price – variable price)
BEP =( 96000×20) /(20-12)
BEP = (96000×20) / 8
BEP = 12000×20
BEP = Rs.240,000
To reach the breaking point, which means 0.
Contribution =
- FC = 96,000
Bep = 0
Achieving a zero response other than 96000 would contribute {96000-96000 =0}. 8= 96,000 12 = ?
96000*12/8=144000. So the variable costs are 144,000. 20 ? = 240,000.
Discount in units = fc/selling price per unit= 96000/20= 4800 units.
Bep in rs = 96,000/96,000 * 240,000 = 240,000. So the answer is bep in rs. 2,40,000. Step in units = 4800 units.
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