Question Three

The Top End Cool Team manufactures mobile air coolers for the NT tropical climate. The costings for 2021 are as follows:

$

Selling price per unit 180

Variable manufacturing costs 102

Annual fixed manufacturing costs 714. 172

Variable selling, distribution and administration costs 24

Annual fixed non-manufacturing costs 365,828

Annual volume 30,000 units

Required

A. Calculate the contribution margin per unit.

B. Calculate the contribution margin ratio.

C. Calculate the break-even in units and sales dollars for 2021

D. Calculate the profit earned in 2021.

E. In a bid to reduce the manufacturing costs the Top End Cool Team are contemplating a move in 2022 to introducing a robotic production which would decrease their labour expense. Variable costs would be reduced by $47 per unit. There would be an increase of $ 532,815 in the fixed manufacturing costs. What would be the unit sales targets needed for 2022 to achieve the same profit that they earned in 2021? Do you think that this change to the manufacturing process can be justified?

F. Prepare the Statement of Profit or Loss for (d) and (e)