Question

Mr. Khan runs a Small business specializing in delivering organic fruit and vegetables to the local area. He buys from local farms and packages these
Together in boxes and delivers them locally. Each boxes sold $ 12. He has the following costs. Direct wages are $ 9 per hours (30 minutes per box on average)
Fruit and vegetables are $ 4 per box other fixed costs incurred each year as follows.

$
Rent of delivery Van 4,500
Rent of Premises 10,500
Advertising 2,000

Answer 1

Answer:

4500+10500+2000= Rs 17000

Answer 2

Given:

Sale price of box = $12

Direct wages per Hour = $9

Time taken by labour to get ready box = 30 min

Fruit and vegetables cost per box = $4

To find:

Direct wages per box = $9 × 30/60 = $4.5

i. Calculation of Margin cost per box:

Marginal cost is variable cost per unit.

Here,

Variable Cost p.u. = Direct wages + Cost of fruit and vegetables

Variable Cost p.u = $4.5 + $4

= $8.5 per box

So, Marginal cost per box is $ 8.5

ii. State the break even formula per unit:

$break \: even \: = \frac{fixed \: cost}{sale \: price \: p.u. - variable \: cost \: p.u}$

iii. Calculation of break even point in boxes:

$break \: even \: = \frac{fixed \: cost}{sale \: price \: p.u. - variable \: cost \: p.u}$

$break \: even \: = \frac{17000}{12 - 8.5}$

Break even point = 4857 boxes

Solution:

i. Marginal cost = $ 8.5

ii.

$break \: even \: = \frac{fixed \: cost}{sale \: price \: p.u. - variable \: cost \: p.u}$

iii. Break even point = 4857 boxes