Question

The company expects to sell 10,000 units. The variable cost per unit is UGX. 1,000 and annual fixed costs of UGX. 20,000,000.

Required:

1. What price would be charged to break even at a given level of activity?
2. Using the price calculated in (a) above, determine the amount of units that should be sold to yield a desired profit of UGX. 1,000,000.
3. What is the profit that will result from 10% reduction in variable cost per unit and UGX. 5,000,000 decreases in fixed costs assuming the current sales in (a) above will be maintained?