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Gram Ltd sells two products: Basic and Platinum . Information about the expected sales volume, selling price and variable cost per unit of the products
Gram Ltdsells two products:BasicandPlatinum. Information about the expected sales volume, selling price and variable cost per unit of the products are as follows:
Basic | Platinum | |
Selling price | $20 | $ 35 |
Variable cost per unit | ||
Direct material | $6 | $12 |
Direct labour | $4 | $6 |
Manufacturing overhead | $2 | $3 |
Budgeted monthly sales volume | 360 | 440 |
The expected monthly fixed cost is $2,000.
Assume thatGram Ltd pays income taxes of 28% and that fixed costs remain constant regardless of the number of product lines.
Required:
- Assume that only Basicis sold. Calculate the following:
- Break-even in dollars.
- Target sales volume in dollars, assuming a target profit of $1,500 after tax.
- Margin of safety as a percentage.
- Assume that both products are sold (Basicand Platinum). Calculate the number of Basicand the number of Platinumthat needs to be sold to break-even.
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