Question 1 Learsen Ltd is a popular brand who manufactures and sells phones. The companys contribution format
Question:
Question 1
Learsen Ltd is a popular brand who manufactures and sells phones. The companys contribution format income statement for the most recent year is given below:
Sales (10,000 units) 5,000,000
Variable expenses 1,700,000
Contribution margin 3,300,000
Fixed expenses 1,560,000
Net operating income 1,740,000
Management is anxious to boost the companys profit and has asked for an analysis of a number of items.
Required:
a. Compute the companys break-even point in both units and sales dollars. Use the equation method. (4 marks)
b. In an effort to increase sales and profits, the management would like to promote a new product, Product Z. It was expected that the annual sales would increase by 20%. i. Compute the companys new break-even point in both units and dollars of sales. Use the formula method. (4 marks) ii. Would you recommend that the changes be made? Why or why not. (2 marks)
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