Question
Sound Master manufacture and sells compact discs, price and cost data are as follows: Sales (150,000 units) = Rs. 3,750,000 Variable Cost per unit Manufacturing
Sound Master manufacture and sells compact discs, price and cost data are as follows:
Sales (150,000 units) = Rs. 3,750,000
Variable Cost per unit Manufacturing Cost = Rs. 18.50
Selling Expense = Rs. 1.30
Total Variable Cost = Rs. 19.80
Annual Fixed Cost Manufacturing Overheads = Rs. 192,000
Selling and Administrative = Rs. 276,000
Total Fixed Cost = Rs. 468,000 Tax Rate 40%
Required:
On the basis of the above data, answer the following independent questions:
a) What is sound master breakeven point in units?
b) What is sound master breakeven point in rupees?
c) How many units would sound master have to sell in order to earn a profit of Rs. 260,000?
d) How many units would sound master have to sell in order to earn after tax profit of Rs. 260,000?
e) What is firms margin of safety: assume firms plans to sell 120,000 units.
f) Operating Leverage Factor?
g) What is the percentage change in income if sales are increased by 5%?
h) Management estimates that variable cost will increase by 8% next year, what will be the new breakeven point (both in units and rupees)?
i) Considering above requirement, if company wants to maintain the same CM ratio, what should be the new selling price per unit?
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