5

An organisation produces products A and B. The following data is available:

Selling price per unit for Product A is $20 and for Product B is $25.

Variable costs per unit for Product A is $11 and for Product B is $18.

Sixty percent of sales in units are expected to be Product A. Fixed costs are expected to be $82,000.

How many units of Product A does the organisation need to sell to break-even?

Answer:

Number

6

Dotty's Designs makes women's clothing. It costs $28,000 to produce 5,000 pairs of polka-dot polyester pants. They have been unable to sell the pants at their usual price of $50. The companu is evaluating two alternatives. They could sell the pants "as is" for a total of $15,000 or they could motify the parts by making them into shorts and sell them for a total of $20,000.

At what cost to modify each pair of pants, would Dotty's Designs be indifferent between the two alternatives?

Answer:

Unit

Number