Question
Question 2 (30 marks) Hi-tech Company sells 400 computer hard-disks which cost data is as follows: Per Unit Selling Price $250 Variable costs $150 Fixed
Question 2 (30 marks)
Hi-tech Company sells 400 computer hard-disks which cost data is as follows:
Per Unit
Selling Price $250
Variable costs $150
Fixed costs are $35,000 per month.
Required
(a) | What is Hi-tech Companys expected contribution per unit? | (2 marks) |
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(b) | Calculate the breakeven sales for Hi-tech Company in $ value and in units per month. | (4 marks) |
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(c) | Recently, new competitors have entered the market of digital products. The sales manager proposes that the selling price of hard-disks will be reduced to $235 as to maintain its existing sales volume per month. Discuss how the sales managers proposal affects the margin of safety performance. | (10 marks) |
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(d) | The sales manager would like to pay the salesman on commission basis of $15 per disk sold, rather than on fixed salaries of $6,000 per month. The sales manager is confident that the change will increase sales volume by 15%. Should change be made? | (14 marks) |
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