Section 4: Cost-Volume-Profit Analysis 18 marks

Elysiumsells two types of sunglasses:SuperstarandBiker. Information about the expected sales volume, selling price and variable cost per unit of the products are as follows:

	Superstar	Biker
Budgeted monthly sales	140	200
Selling price	320	370
Variable cost per unit
Direct material	70	100
Conversion costs	120	150

The expected monthly fixed cost is $16,000.

Assume thatElysium pays income taxes of 28% and that fixed costs remain constant regardless of the number of product lines.

Required:

1. Assume that only Superstaris sold. Calculate the following:
   1. Break-even in dollars. (3 marks)
   2. Target sales volume in units, assuming a target profit of $32,000 after tax. (4 marks)
   3. Margin of safety as a percentage. (3 marks)
   4. If Elysium's direct material cost increase by 6%, how many units will the company have to sell to reach its break-even point? (3 marks)

1. Assume that both products are sold (SuperstarandBiker). Calculate the total number of Superstar that needs to be sold to break-even. (5 marks)