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6) Por favor Company makes and sells one kind of toy. The fixed costs of operating the company are $ 500,000 and the variable costs
6) Por favor Company makes and sells one kind of toy. The fixed costs of operating the company are $ 500,000 and the variable costs for the toy are $12 per unit. The toys are sold for $30 per unit. Calculate the following (show all the steps and your calculations). a) The break-even point in units b) The break-even point in dollars. c) The margin of safety in units at 85,000 toys being sold. d) The margin of safety in percentage at 85,000 toys being sold. e) How many toys should they sell to earn a net income of AED 250,000? f) Prepare a CVP income statement to prove your point. [3 marks] g) The company believes that it will be able to reduce its variable expenses by $2 per toy by purchasing a machine for the production of toys but that will increase fixed costs by AED 40,000. What is the new break-even in dollars rounded to the nearest dollar? h) Refer to original data, if the company is able to sell only 20,000 toys, calculate the new operating income or loss. Comment on your answer. [3 marks]
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